By Dieter Rencken | |
Special Contributor |
Following a barrage of criticism aimed at the FIA about alleged conflicts of interest over its approval for the sale of Formula 1's commercial rights by CVC Capital Partners to Liberty Media, and the championship's inequitable revenue structures, F1's governing body last week took the extraordinary step of issuing a clarification. Refuting what it called "certain declarations and comments, clearly inaccurately informed or made maliciously", the FIA stated it had "no knowledge" of "bilateral agreements that exist between each team and the Commercial Rights Holder". The sale had been approved by the FIA's World Motor Sport Council by "taking into account exclusively the terms of the existing agreements", and in "the best interest of the championship", with the statement adding the FIA "would naturally be happy to demonstrate the absence of any conflict of interest to any competent authority that may so request". Ever since the sale of the rights was announced in September last year the FIA has been under what can only be deemed to be agenda-driven pressure from various sectors, while ex-FIA president Max Mosley has also been openly critical of his successor Jean Todt over FIA policy and sundry issues. Mosley, a Labour supporter with close ties to the party's deputy leader Tom Watson - records show Mosley's donations to the politician's election campaign amount to almost £250,000 - is a former business associate to Alan Donnelly, the former Brussels-based Labour MEP-turned-political strategist who Mosley appointed as his representative at grands prix while FIA president, and appointed him as chairman of the F1 stewards. Until recently Donnelly's lobby group was based in the same building as the FIA Foundation - a distinctly separate charity from the FIA, which provided its funding via the sale of F1's commercial rights by Mosley's administration to Ecclestone - when it fell under aegis of David Ward, the Mosleyite who unsuccessfully stood against Todt in the 2013 FIA presidential elections. Since then Ward has headed Global NCAP, the new car crashworthiness assessment programme of which ex-FIA communications director Richard Woods is listed in a similar capacity. Mosley is the chairman of NCAP, which in 2015 presented an award to Donnelly at an event hosted by the Labour MEP for sourthern England, Anneliese Dodds. Now consider that the politician pushing the EU commission to investigate F1's various alleged ills, including the question of the FIA's 1% shareholding in Delta Topco (grand prix racing's commercial rights holder under CVC Capital Partners) is the very same Dodds. The over-riding concern is not whether politicking exists, for whatever reason, but whether the FIA approved the sale for reasons of financial gain, given that in 2013 it acquired a 1% share in Delta Topco for around £400,000. After the deal for the sale of the rights this could be worth between £40million and £75m depending upon the accounting base applied, namely the capital ($4.4billion) or corporate valuation ($8bn). The answer lies in clauses contained within the 100-year agreement signed in 2001 between Bernie Ecclestone and Mosley's FIA, which kicked in in 2011. Documents seen by Autosport show that the fabled 'Don King Clause', intended to prevent the rights from falling into inappropriate hands, provides the FIA with extremely limited powers. Under this so-called 'Umbrella [100-year] Agreement' and the accompanying Regulatory Agreement, the FIA can refuse any change of control only if it believes in good faith that the incoming CRH's abilities to fulfil its obligations are/could be severely compromised. Given CVC sucked money out of Delta Topco at breathtaking pace and Liberty not only has the means, but, crucially, the desire, to invest in F1, this is clearly not the case. Further, FIA approval was not required should the entity be listed on a stock exchange, or in the event of any change of control of that entity - on the basis that stock exchanges, particularly those governed by Securities Exchange Commission statutes, are adequately policed. From the start Liberty was open that it intended IPO-ing its acquisition on NASDAQ, and, once the sale was completed, immediately set these wheels in motion. Clearly, then, any withholding of permission under such circumstances would have left the sport's governing body open to multi-million (billion?) dollar law suits. In addition, the FIA would clearly have failed in its duty to ensure that F1 returns to the best possible health. Some clarity on this shareholding: by the time the Umbrella Agreement kicked in (10 years after it was signed) the FIA found itself in severe financial straits as the costs of administering the championship vastly exceeded the income provided by the CRH for this service, compounded by the fact that the FIA did not have access to the proceeds of the sale (see below). After protracted negotiations between the CRH and FIA it was agreed the CRH would raise this annual fee from $7m (plus paltry escalators) to $25m. In addition, the CRH granted the FIA the option of acquiring a 1% shareholding at a price linked to the transactional value of the Umbrella Agreement as negotiated between the Ecclestone and Mosley factions, with the actual value to be determined once CVC listed the rights. That CVC then decided against IPO-ing lay totally outside the FIA's control, but when Liberty last year approached the FIA for approval it made clear it intended listing F1's rights, with all shares subject to market co-ordination and lock-up agreements; i.e. they may not be traded for a fixed period, and then only under specific circumstances. This process - fundamentally as planned by CVC - is under way, and, no, the FIA is not suddenly flusher than at the end of August, due to various 'drag-along' clauses. Critics suggest that the EU's 2001 'decision', which blessed the Umbrella Agreement, forced the FIA to separate its sporting and commercial powers - by implication making any stake in the commercial rights holding entity illegal. Fact is there was no decision - the EU accepted a settlement proposed by Ecclestone and Mosley, but only after 'their' FIA agreed to put its house in order with respect to abuse of its sporting powers. That the FIA and CRH were subsequently able to fulfil all EU statutory requirements between 2001 and '09, while ostensibly operating outside the 100-year agreement, suggests there was no urgent need to enter into this century-long agreement; that it was driven by factors other than EU regulations. In fact, logic dictates that the FIA had almost 10 years to negotiate a sale/lease of its rights, rather than rush through the 100-year deal. After all, the FIA's World Endurance Championship, World Rally Championship and World Touring Car Championship commercial rights have subsequently been leased for periods ranging from five to 10 years. Go figure. That the EU considers it appropriate for sporting bodies to profit from the sale of their commercial rights in order to fund administrative activities and foster grass roots activities is borne out by a 2011 study, which states: "The licensing of sports media rights should respond to different market demands and cultural preferences while ensuring the Internal Market and competition law is respected". The only competition laws the FIA had (then) been found to be in breach of related to Ecclestone's initial monopoly over all FIA championships, that the FIA outlawed competitive series, and banned drivers and officials who supported those competitive series. The 1% shareholding does not in any way impact on those provisions. Indeed, the EU identified three revenue streams for sporting bodies: profit from the sale of their rights; direct and indirect from the gambling and lottery industries, and state/national subsidies. Clearly if a sporting body is not permitted to benefit from its own rights, then it must turn to the other two, less desirable options. Then there is the question of income derived from the sale of F1's rights for what is the paltry sum of an average of $3m per annum - at a time when F1 was generating annual revenues of $500m (now $1.8bn). The proceeds, $300m, were stashed in the ring-fenced FIA Foundation, which falls under the control of Britain's Charity Commission - and can therefore not be touched by the Paris-based FIA. Why Mosley's administration did that only its then-members can explain more fully. Tax reasons have been advanced as the reason; equally, one hears that the FIA was granted tax concessions by the French government at the time, in order to retain the FIA (under a British president) in France - which the body then came perilously close to losing when Mosley considered relocating the FIA to Switzerland. Now imagine the motorsport use this $300m could have been put to by the FIA, rather than being hidden in a UK charity to which the FIA had no formal access. Question: were the French tax authorities ever approached to extend these concessions to the $300m? Sources suggest not. Finally, there is the question of the EU's pending investigation into so-called 'abuse of power' allegations as filed by Force India and Sauber: there is no denying F1's 2013-20 inequitable revenue structures - first revealed by Autosport over four years ago, and since published annually - unfairly tilt the playing field in favour of major teams, but, again, the greater question is whether the FIA is party to these structures. For over two years now Ms Dodds has banged on about F1's inequitable structures, each time mentioning the FIA in the same breath. According to FIA sources she has not once contacted the FIA to check its involvement in these agreements - nor did her office respond to requests (most recently made three times this week) for details on any contact she may have had with the FIA. Whatever, the fact is that the FIA was not and is not a party to the agreements between the commercial rights holder and teams. The key lies in the words 'bilateral agreements', a document(s) agreed between two parties - the teams individually and CRH - and not three. So the FIA was excluded from negotiations, with various sources being absolutely adamant they have no knowledge of the contents of these agreements, swearing they have never even seen one, let alone the whole spread - each of which contains unique clauses and provisions. However punitive they may have been, the provisions of these bilaterals were accepted by the teams individually, and the agreements signed accordingly. If they now have (retrospective) grievances regarding 'abuse of power' or monopolistic practices, these should be addressed directly with the CRH - or with appropriate authorities, such as EU structures. That F1's commercial contracts require urgent revision has been obvious for many years now, but to glibly and publicly involve the FIA in issues to which it is not, nor been under Todt's rule, a party, points to politicking at its worst, particularly when the FIA was not even granted right of reply in the first place. |
By Dieter Rencken | |
Special Contributor |
Following a barrage of criticism aimed at the FIA about alleged conflicts of interest over its approval for the sale of Formula 1's commercial rights by CVC Capital Partners to Liberty Media, and the championship's inequitable revenue structures, F1's governing body last week took the extraordinary step of issuing a clarification. Refuting what it called "certain declarations and comments, clearly inaccurately informed or made maliciously", the FIA stated it had "no knowledge" of "bilateral agreements that exist between each team and the Commercial Rights Holder". The sale had been approved by the FIA's World Motor Sport Council by "taking into account exclusively the terms of the existing agreements", and in "the best interest of the championship", with the statement adding the FIA "would naturally be happy to demonstrate the absence of any conflict of interest to any competent authority that may so request". Ever since the sale of the rights was announced in September last year the FIA has been under what can only be deemed to be agenda-driven pressure from various sectors, while ex-FIA president Max Mosley has also been openly critical of his successor Jean Todt over FIA policy and sundry issues. Mosley, a Labour supporter with close ties to the party's deputy leader Tom Watson - records show Mosley's donations to the politician's election campaign amount to almost £250,000 - is a former business associate to Alan Donnelly, the former Brussels-based Labour MEP-turned-political strategist who Mosley appointed as his representative at grands prix while FIA president, and appointed him as chairman of the F1 stewards. Until recently Donnelly's lobby group was based in the same building as the FIA Foundation - a distinctly separate charity from the FIA, which provided its funding via the sale of F1's commercial rights by Mosley's administration to Ecclestone - when it fell under aegis of David Ward, the Mosleyite who unsuccessfully stood against Todt in the 2013 FIA presidential elections. Since then Ward has headed Global NCAP, the new car crashworthiness assessment programme of which ex-FIA communications director Richard Woods is listed in a similar capacity. Mosley is the chairman of NCAP, which in 2015 presented an award to Donnelly at an event hosted by the Labour MEP for sourthern England, Anneliese Dodds. Now consider that the politician pushing the EU commission to investigate F1's various alleged ills, including the question of the FIA's 1% shareholding in Delta Topco (grand prix racing's commercial rights holder under CVC Capital Partners) is the very same Dodds. The over-riding concern is not whether politicking exists, for whatever reason, but whether the FIA approved the sale for reasons of financial gain, given that in 2013 it acquired a 1% share in Delta Topco for around £400,000. After the deal for the sale of the rights this could be worth between £40million and £75m depending upon the accounting base applied, namely the capital ($4.4billion) or corporate valuation ($8bn). The answer lies in clauses contained within the 100-year agreement signed in 2001 between Bernie Ecclestone and Mosley's FIA, which kicked in in 2011. Documents seen by Autosport show that the fabled 'Don King Clause', intended to prevent the rights from falling into inappropriate hands, provides the FIA with extremely limited powers. Under this so-called 'Umbrella [100-year] Agreement' and the accompanying Regulatory Agreement, the FIA can refuse any change of control only if it believes in good faith that the incoming CRH's abilities to fulfil its obligations are/could be severely compromised. Given CVC sucked money out of Delta Topco at breathtaking pace and Liberty not only has the means, but, crucially, the desire, to invest in F1, this is clearly not the case. Further, FIA approval was not required should the entity be listed on a stock exchange, or in the event of any change of control of that entity - on the basis that stock exchanges, particularly those governed by Securities Exchange Commission statutes, are adequately policed. From the start Liberty was open that it intended IPO-ing its acquisition on NASDAQ, and, once the sale was completed, immediately set these wheels in motion. Clearly, then, any withholding of permission under such circumstances would have left the sport's governing body open to multi-million (billion?) dollar law suits. In addition, the FIA would clearly have failed in its duty to ensure that F1 returns to the best possible health. Some clarity on this shareholding: by the time the Umbrella Agreement kicked in (10 years after it was signed) the FIA found itself in severe financial straits as the costs of administering the championship vastly exceeded the income provided by the CRH for this service, compounded by the fact that the FIA did not have access to the proceeds of the sale (see below). After protracted negotiations between the CRH and FIA it was agreed the CRH would raise this annual fee from $7m (plus paltry escalators) to $25m. In addition, the CRH granted the FIA the option of acquiring a 1% shareholding at a price linked to the transactional value of the Umbrella Agreement as negotiated between the Ecclestone and Mosley factions, with the actual value to be determined once CVC listed the rights. That CVC then decided against IPO-ing lay totally outside the FIA's control, but when Liberty last year approached the FIA for approval it made clear it intended listing F1's rights, with all shares subject to market co-ordination and lock-up agreements; i.e. they may not be traded for a fixed period, and then only under specific circumstances. This process - fundamentally as planned by CVC - is under way, and, no, the FIA is not suddenly flusher than at the end of August, due to various 'drag-along' clauses. Critics suggest that the EU's 2001 'decision', which blessed the Umbrella Agreement, forced the FIA to separate its sporting and commercial powers - by implication making any stake in the commercial rights holding entity illegal. Fact is there was no decision - the EU accepted a settlement proposed by Ecclestone and Mosley, but only after 'their' FIA agreed to put its house in order with respect to abuse of its sporting powers. That the FIA and CRH were subsequently able to fulfil all EU statutory requirements between 2001 and '09, while ostensibly operating outside the 100-year agreement, suggests there was no urgent need to enter into this century-long agreement; that it was driven by factors other than EU regulations. In fact, logic dictates that the FIA had almost 10 years to negotiate a sale/lease of its rights, rather than rush through the 100-year deal. After all, the FIA's World Endurance Championship, World Rally Championship and World Touring Car Championship commercial rights have subsequently been leased for periods ranging from five to 10 years. Go figure. That the EU considers it appropriate for sporting bodies to profit from the sale of their commercial rights in order to fund administrative activities and foster grass roots activities is borne out by a 2011 study, which states: "The licensing of sports media rights should respond to different market demands and cultural preferences while ensuring the Internal Market and competition law is respected". The only competition laws the FIA had (then) been found to be in breach of related to Ecclestone's initial monopoly over all FIA championships, that the FIA outlawed competitive series, and banned drivers and officials who supported those competitive series. The 1% shareholding does not in any way impact on those provisions. Indeed, the EU identified three revenue streams for sporting bodies: profit from the sale of their rights; direct and indirect from the gambling and lottery industries, and state/national subsidies. Clearly if a sporting body is not permitted to benefit from its own rights, then it must turn to the other two, less desirable options. Then there is the question of income derived from the sale of F1's rights for what is the paltry sum of an average of $3m per annum - at a time when F1 was generating annual revenues of $500m (now $1.8bn). The proceeds, $300m, were stashed in the ring-fenced FIA Foundation, which falls under the control of Britain's Charity Commission - and can therefore not be touched by the Paris-based FIA. Why Mosley's administration did that only its then-members can explain more fully. Tax reasons have been advanced as the reason; equally, one hears that the FIA was granted tax concessions by the French government at the time, in order to retain the FIA (under a British president) in France - which the body then came perilously close to losing when Mosley considered relocating the FIA to Switzerland. Now imagine the motorsport use this $300m could have been put to by the FIA, rather than being hidden in a UK charity to which the FIA had no formal access. Question: were the French tax authorities ever approached to extend these concessions to the $300m? Sources suggest not. Finally, there is the question of the EU's pending investigation into so-called 'abuse of power' allegations as filed by Force India and Sauber: there is no denying F1's 2013-20 inequitable revenue structures - first revealed by Autosport over four years ago, and since published annually - unfairly tilt the playing field in favour of major teams, but, again, the greater question is whether the FIA is party to these structures. For over two years now Ms Dodds has banged on about F1's inequitable structures, each time mentioning the FIA in the same breath. According to FIA sources she has not once contacted the FIA to check its involvement in these agreements - nor did her office respond to requests (most recently made three times this week) for details on any contact she may have had with the FIA. Whatever, the fact is that the FIA was not and is not a party to the agreements between the commercial rights holder and teams. The key lies in the words 'bilateral agreements', a document(s) agreed between two parties - the teams individually and CRH - and not three. So the FIA was excluded from negotiations, with various sources being absolutely adamant they have no knowledge of the contents of these agreements, swearing they have never even seen one, let alone the whole spread - each of which contains unique clauses and provisions. However punitive they may have been, the provisions of these bilaterals were accepted by the teams individually, and the agreements signed accordingly. If they now have (retrospective) grievances regarding 'abuse of power' or monopolistic practices, these should be addressed directly with the CRH - or with appropriate authorities, such as EU structures. That F1's commercial contracts require urgent revision has been obvious for many years now, but to glibly and publicly involve the FIA in issues to which it is not, nor been under Todt's rule, a party, points to politicking at its worst, particularly when the FIA was not even granted right of reply in the first place. |