How cost limit breach could decide F1 world championship


According to the FIA’s financial regulations, this is a possible outcome if a team exceeds the cost cap, as many expect.

However, since there is no precedent, no one knows which sanctions will be applied from the list of possible sanctions specified in the regulation.

These rules contain a long list of violations, often involving teams not reporting their spending accurately or in a timely manner, or attempting to cheat cost cap management. [CCA]The body responsible for monitoring compliance with these rules.

On Tuesday, we heard about the first such offense, albeit minor, that Williams was fined $25,000 for not filing his 2021 paperwork by March 31.

However, the most important parts of the financial regulations deal with simple spending cases that exceed the limit.

Such violations will be referred to the Cost Cap Arbitration Committee. [CCAP]It is a group of six to twelve referees recommended by the FIA ​​and teams. Any decision made by the Panel may be appealed to the International Court of Appeal by the relevant team or other parties.

Budget overruns fall into two categories, whether they’re numbers initially voluntarily reported by a team or those that are discovered later during a survey.

There’s a simple split at 5% of the cap: A violation below this threshold is considered a “minor violation”, while anything over 5% is considered a “major violation.” The second situation is taken much more seriously.

This 5% figure cannot be ignored. Teams are currently targeting $140 million plus $1.2 million for Race 22, for a total of $141.2 million for 2022. So, a 5% breach represents approximately $7 million in additional spending, potentially enough to equate to a large amount of R&D. The difference between winning the title and losing it.

Regulations state that in the event of a 5% excess, CCAP “may impose a financial penalty and/or minor sports penalties.”

A financial sanction is simply defined as a “fine amount determined on a case-by-case basis”. The fine can be seen as a wrist slap for an organization that literally has more money than it can spend, but more worrying for teams is the small menu of sporting penalties from which one or more can be chosen.

The least painful sanction is a public reprimand, but a manufacturer-backed team like Mercedes would be a little embarrassed to take it.

The more dramatic alternatives are to deduct the championship points of teams or drivers for the respective season.

Then there is what is clumsily described as “for the avoidance of doubt, the suspension of one or more stages of one or more competitions, excluding the race itself” – which means being forced to actually miss training sessions.

There are also two penalties that affect future performance rather than last season’s results – a reduction in the team’s cost cap for the following year and ‘limitations on the ability to perform aerodynamic or other tests’.

But what happens if a team goes over the limit by more than 5% and enters the “financial sports penalty” zone?

In this case, one element of the sanction is clear: CCAP “mandates deductions in the constructors’ championship”. It may also “inflict a financial penalty and/or any other material sports penalty”.

All sanctions foreseen for a minor violation are possible, with the exception of public reprimand.

However, two more severe sanctions were added to the menu, namely “suspension of one or more competitions, including the race itself, for the avoidance of doubt” and, more seriously, “exclusion from the championship”.

We’ll see how CCSI chooses a sanction from the range of sanctions proposed for minor and major violations, but the rules make it clear that circumstances will play a role. In essence, you are potentially better off if you cooperate with CCAP and FIA auditors and are open and honest.

Aggravating factors include “any element of malicious intent, fraud, willful concealment or fraud”, “lack of cooperation”, “multiple breaches” during the year or breaches during the previous year, and “amount of breach”.

On the other hand, mitigating factors are considered to be ‘voluntary disclosure’, ‘history of compliance’, ‘full and unhindered cooperation’ and perhaps most importantly ‘unforeseen force majeure’.

Will the teams be able to use global inflation by citing the role of the conflict in Ukraine as an important factor, force majeure?

Those who expect to exceed the limit are certainly aware of the relevance of the 5% threshold and the lesser penalties associated with it. However, they do not know exactly how these penalties will be distributed, so even staying within this 5% is a bit of a gamble.

Ferrari boss Mattia Binotto said: “There is a 5% threshold in the regulations.”

“What is a minor force majeure violation? What will the referees and the FIA ​​decide on this in terms of penalties? No idea.

“But I don’t think there is a way for us and many teams to cross borders.

“And even firing people, I don’t think it’s a good and fair choice. It’s already summer. When you organize and do it, the benefit it can have is not enough to cover the overpriced price and cost we have.”

Binotto is adamant that unless an upward adjustment is made to stabilize inflation, the rules will be broken by many teams.

“What will be the effects? The Italian said. “The most important thing for me is that many teams will break it. And I think that will be bad for financial deals.

“And we’re going to start discussing whether financial regulation is helpful, does it work? And to open everything up for discussion. And I think, again, to avoid that, because somehow it’s important to have a ceiling, I think the only way is to breathe, take some more time, and try to do a better, decent job for next year and next year. next. »

Red Bull’s Christian Horner makes an interesting point about how some might try to approach the 5% threshold in the typical F1 tradition of pushing the limits.

“I definitely think all the big teams will go over 140 this year,” he said. As Mattia points out, there is a 5% threshold for a minor violation. What is the penalty for a minor violation?

“And what we don’t want to do is play a sissy game. Like say, will it be 4.9% more? Are we going to go up to 4.7% more? And this would be [worth] a development that could be the differentiating factor of this world championship. »

The bosses of the big teams have been blunt in front of the media about the possibility of crossing the line, and have been equally open at F1 Commission meetings and similar matches.

In fact, they’re not hiding anything and paving the way for several teams to break the $141.2 million mark, leaving CCSI with the difficult task of handing out penalties after the season when the final numbers are calculated.

Will CCAP members be more tolerant of transgressors? And when one of the ground rules is that “there must be no associated costs that exceed the cost cap,” how will teams deal with the fact that they know and plan to overspend all year?

The bigger question is whether CCAP will be brave enough to make a post-season decision on a point reduction that affects the outcome of the Drivers’ or Constructors’ Championships? Remember, these are the judges who work independently of the FIA ​​and do not carry baggage.

Removing a pilot’s title would be a difficult decision, but Olympic athletes can be said to have lost gold medals months or years after their race, after the results of their drug tests had passed through the system. It’s never too late to punish cheaters.

But such a move in F1 long after the Abu Dhabi GP might make the turmoil that followed last year’s shadowy final seem like a trivial matter by comparison. This will inevitably be followed by an appeal to the CIA, which will take even longer, and within three months, the PICC itself will be able to review its decisions if new evidence emerges.

It should also be noted that financial regulations provide for a five-year statute of limitations, which leaves some leeway for a whistleblower who then leaves a team to report suspicious behavior. In other words, CCAP can always go back and explore the 2022 season in 2027…

Are the top teams playing to the fact that if they all cross the limit but stay within the 5% threshold for a “minor” infraction, they won’t face the most severe penalties that affect the outcome of the championship? Anyway, that’s what it looks like.