The Weekly Grapevine

Spa and the Taxpayers...

For graphic proof of exactly why Bernie Ecclestone insists upon governmental guarantees when signing up Formula One Grand Prix venues, look no further than two of the sport's 'S' circuits: Spa-Francorchamps and Sepang.

The former has had a chequered history since hosting the fourth-ever World Championship Grand Prix in 1950. Run on the frighteningly fast 14.08 kilometre, triangular circuit - made up of a mix of flowing public roads - until 1968 (albeit with a skip in 1957), Spa-Francorchamps found itself canned for 1969 after a rigorous safety campaign led by Jackie Stewart.

The Scot, having survived a 200 km/h crash on the day after his twenty-seventh birthday, found himself trapped for what must have seemed like hours in a petrol-dripping monocoque tub whilst fire extinguisher-less marshals sawed and clawed and hammered at chassis members tubes to extricate him. Eventually he was freed, but only after teammate Graham Hill begged some agricultural tools with which to free his stricken colleague from a nearby farmhouse. Then, the ambulance took another ten minutes to arrive.

Any wonder Stewart thereafter fought for better safety standards and facilities and that lengthy Spa, in retrospect quite deservedly so, became the first victim of the triple champion-in-waiting's attention?

Thereafter Belgium's Grands Prix flopped about Nivelles and Zolder - claiming Gilles Villeneuve in the process- before returning to a by-now much-modified - and seriously shortened - Spa-Francorchamps. The combined communities of Malmedy and Stavelot had made a superb job of melding roads and purpose-built track, and there was not a single true-blue F1 fan who regretted the prodigal circuit's return in 1985, even if shortened by over 50% to 6.9 kms.

All seemed hunky-dory for the last real race track. Until 2003, that is. During the eighties, one of Ecclestone's companies, with no less than his wife Slavica at the helm, had taken over promotion of the Belgian Grand Prix, and all went to plan until 2002, when the Belgian government - in advance of all European Union guidelines and agreements - introduced a ban on tobacco livery. The next Grand Prix was summarily cancelled via a contractual clause permitting same in the event of anti-tobacco legislation, and Ecclestone pulled out of the deal.

But, all of F1 wanted back to Belgium, wanted back despite the most horrendous of facilities and overall shortcomings: no Paddock Club to speak of, an annual trek through squelchy mud - made all the more so by open, overflowing urinals and filthy unisex toilets - to reach sodden seats on open stands, a seriously disjointed media centre, traffic jams which make Silverstone at its absolute worst seem no more than a minor snarl-up, rip-off pricing for everything from parking to potato frites, and an overzealous police force.

In addition, the local population bayed for political blood. With accommodation in the region at a premium - and the closest town of any consequence, Liege, being 40 kilometres distant - locals had grown accustomed to fleecing fans. Now their golden goose was history - all for the sake of a few cigarette stickers - and they demanded that exemptions be granted to enable F1 to run tobacco livery. The precarious state of the region's local politics ensured that the way was cleared for a return to Spa.

A deal covering 2004-2010, at €14m per annum plus a yearly escalation factor of five per cent, was struck on 31 October 2003, without significant public or political debate, with the Societe de Promotion du circuit de Spa-Francorchamps (SPSF), who in turn appointed Didier Dufourny, some time tin-top/GT racer and rock concert impresario via a company he inherited from his father, as promoter of the event. He called his Grand Prix-promoting company DDGP, and from the start it was evident the entity had not a snowball's hope in hell of breaking even, let alone turning a profit.

Dufourny resorted to pop music gimmicks to promote patronage of 'his' event - the most (in)famous being free Friday entry with each tank of fuel purchased en route to the circuit, and massive discounting of Belgian tickets at race meetings all over Europe. Fans were alienated by a constant shifting of grand stands and renumbering of seats, and VIPs, forced to plug through mud in their hand-stitched shoes, swore 'Never Again!'

The killer blow, though, was an unforeseen tax dispute with the communities of Malmedy and Stavelot: Belgian law demands that businesses pay local taxes, based on turnover, to the local community, and in Dufourny's case both villages demanded their full dues on turnover - despite the company hemorrhaging money like there was no tomorrow, which there evidently wasn't for DDGP, which is believed to have lost over €20m in two years after ticket sales fell by half to 50,000 and discounting further eroded revenues.

Possibly Ecclestone, who certainly did not become one of Britain's richest men by being myopic, had foreseen all this, for he demanded that Local Government underwrite Dufourny's efforts. And, here the story takes a peculiar twist.

Serge Kubla, former Economics Minister for Wallonia, and the man charged in 2003 with bringing a Belgium Grand Prix back to Spa, last week told state broadcaster RTBF: "When I was negotiating with Bernie Ecclestone about getting the Grand Prix back in Belgium, he set three conditions: changing anti-tobacco legislation, getting an organizer and a guarantee for the competition. The law was changed, we got an organizer, but the government always refused to put up a guarantee."

Not so: despite Kubla's denials, it appears that the former Minister-President of the French-speaking province, Jean-Marie Happart, signed the guarantee, and, what is more, did so 'without reading' the document.

This, then, explains why the Belgian Grand Prix appears on the 2006 calendar without an asterisk signifying 'Subject to contract', for Ecclestone's only legal option, if he is to invoke the guarantee clause, is to include the race on all fixture lists through to 2010.

Either way he, or rather the true commercial rights' holder, SLEC - in which he is a 25% shareholder with a trio of banks holding the balance - is sitting, literally, in the pound seats: in 2006, SLEC stands to collect €16.5m, regardless of the race running its course, regardless of whether locals accommodate a single race fan or sell one bag of frites.

By 2010, whether or not Formula One holds undisputed World Championship, the fee will have escalated to over €20m - all because some politician allegedly signed a document 'without reading' it. Put differently, this lapse of literary diligence will have cost Walloon taxpayers €100m - of which 25% goes straight into Ecclestone's family trust - by the time the contract has fully matured. By then every Wallonian will have coughed €20 of hard-earned money, every Euro of which will have flowed to SLEC...

...and the Future of Malaysia

Malaysia's case is somewhat different, but only as regards the financial mechanics and not their essence, and, once again, Ecclestone (SLEC) just cannot lose.

Host of the Asian country's Formula One Grand Prix since 1999, Sepang International Circuit, built and owned by Malaysia Airports Holdings Bhd via subsidiary company Malaysia Airports Technologies Sdn Bhd, in 2003 agreed terms with Malaysia's Finance Ministry to dispose of SIC - which, incidentally, has yet to break even - for RM389.35 million ($130m) as part of a long-term structure.

But, the sticking point is the circuit's Formula One contract with SLEC, which runs - you've guessed it - to 2010.

"If they (Malaysia Airports Holdings Bhd) were to novate (substitute for another) the promoter's agreement, then the Formula One management requires the government to guarantee the performance. However, as a sovereign country, the government could not be taken to court," said SIC General Manager Datuk Ahmad Mustafa during the running of last weekend's rather poorly attended A1 Grand Prix. Note the ominous words in the last sentence.

"They, the promoters and the Formula One management, are working out a formula and I believe they would announce it soon," he added.

All of which could mean the disappearance of the Malaysian Grand Prix from the calendar, and sooner rather than later, for the Finance Ministry falls within the control of Prime Minister Abdullah Badawi, who regularly criticizes the policies of his predecessor, Prime Minister Mahathir Mohamad.

Mohamad it was who initiated (presently) the world's tallest building, the Petronas Twin Towers, plus SIC and its Grand Prix, as visible signs of the progress his country made during his tenure. Badawi, however, believes the developing country should be concentrating upon its educational needs and transport infrastructure rather than these 'mega-projects', as he calls them.

Given these sentiments, coupled with Mustafa's suggestion that the government could be ready to break its contract with SLEC, even in the face of legal threats, it is not difficult to foresee a scenario whereby Ecclestone agrees to same, but, obviously, on his terms.

As Formula One's tsar is known to have more applications on his desk than the 19 races recently agreed to by the sport's ten competing teams, the possible outcome is not hard to predict: cancel Belgium by consent with the Walloon government, ditto Malaysia, and, institute two new events in, say, Dubai and South Africa. And, similar break clauses will, as a matter of course, be included in their contracts and be signed just as blindly.

Voila: SLEC trousers €200m-€100m from each cancelled event, of which €25m by two goes straight to Ecclestone's family trust - whilst simultaneously profiting from greater hosting fees negotiated with the newcomers, who rather unexpectedly find themselves included on Formula One's future schedules. Will their promoters thank Belgium and Malaysia for the inclusions? Nope - for, no doubt, they will be blind politicians, too.

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- The Autosport.com Team

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