[Author: Pranjal Shah, student of law at Gujarat National Law University]
Sports, particularly team sports, have long seen the woes of unequal bargaining power between the management of teams and the athletes. Although Formula One is not a conventional team sport, tales of the power disparities between the constructers and drivers are almost fundamental to the sport. Generally, it is the drivers who are on the bleaker side of things, which means they are vulnerable to the whims of the constructors. Therefore, instances of drivers being dropped suddenly and surprise announcements of drivers jumping teams are common, due to which, there is an underlying uncertainty when it comes to driver contracts in Formula One.
To phrase it differently, driver contracts, with the constructors on the one end and the drivers on the other, constitute the heart of the competition; and the sanctity of contracts is especially crucial in such dynamics. However, as has been said, contracts in Formula One are worth only so much as you are willing to pay to break them. This dichotomy has been aptly highlighted in many recent instances.
The Tug of War Between Alpine F1 Team and McLaren Racing
Oscar Piastri, the 2021 Formula 2 Champion, belonged to the Alpine Academy, and as is fitting, was the Alpine F1 Team’s reserve driver for 2022. The recent ruling of the Contract Regulation Board (CRB) threw the spotlight on Piastri, Alpine and McLaren Racing, with the CRB deciding which of the latter two teams had a claim on Piastri’s services for the 2023 Season.
The dispute dates back to 2021, when a Term Sheet was executed between Alpine and Piastri for the 2023 and 2024 Seasons, with Alpine intending to exchange binding contracts within 10 business days of 15th November 2021. However, no such contracts were exchanged. Finally, in March 2022, literal days before the start of the 2022 season, Alpine registered a reserve deal with the CRB, which was sent to Piastri’s team on 15th March, and was justified by Alpine as being an emergency deed. However, since this was not a proper reserve driver agreement, Piastri could not avail a super licence to be able to actually drive in Formula One. Secondly, it was only valid till 31st December 2022. However, Alpine did not take any further steps, save for an ‘Oscar Piastri 2023/2026 Proposal’ with the constructor’s four-year plan in regards to Piastri. On 3rd June 2022, Piastri signed a ‘Driving Agreement’ with McLaren, wherein, his role for 2023 was dependant on Daniel Ricciardo seeing out the whole duration of his contract with McLaren and a guaranteed racing seat for 2024.
Fast forward two months and Alonso announced his surprise move to Aston Martin and Alpine sought security in Piastri’s services through a public announcement, despite knowing Piastri’s intentions of moving to McLaren. Piastri, on his part, denied Alpine’s claim and Alpine attempted to secure him by editing the phrase ‘Legally Binding’ into the Term Sheet. The dispute went to the CRB which held that Piastri’s contract with McLaren was the only valid one.
The Parting of Sergio Perez and BWT Racing Point
The 2020 Season was Sergio Perez’s last with BTW Racing Point F1 Team. His seven-year relationship with the team saw an abrupt end when Racing Point jumped on the chance to sign Sebastian Vettel following his departure from Ferrari. That is ordinary enough, but the problem lies in the way Racing Point went about it.
From early in the 2020 Season, the team was engaged in a sort of double-talk, assuring the media and the fans that they have valid contracts with both their drivers for the 2021 Season but refusing to confirm the driver line-up. So, while Racing Point was forthcoming in its assurances, it stopped just shy of a confirmation, and Perez, relying on such assurances strapped in for another season with the team. Then Ferrari announced its contract with Carlos Sainz Jr. and Vettel was left up for grabs. Racing Point, headed by Lawrence Stroll, was definitely not parting with his son, which left Perez, in the other seat, expendable and Racing Point capitalised, announcing Vettel in early September.
Perez, while claiming that he had connected the dots, enlightened that he had been officially informed only a day before Racing Point’s announcement and he had no backup, basing his plans on assurances by the constructor and was thus left without an F1 seat. To reiterate here, the issue in this case is not the replacement, but the manner of replacement, the double talk and public assurances, for Racing Point, like the rest of the world, was not aware of Ferrari’s decision prior to its announcement.
Too Many Contracts for Sauber
Going further back to 2015, the Sauber F1 Team (currently Alfa Romeo Racing) began its Season with four valid driver contracts for two seats. Facing acute financial instability, it signed Marcus Ericsson and Felipe Nasr, both of whom had good sponsorship deals. The constructor allegedly announced both the drivers without clarifying the position of its existing driver contracts till the Season itself began.
Adrian Sutil had a year left in his contract with no early termination clause in favour of Sauber and the latter ended up having to pay him out. If this was not embarrassing enough, his teammate, Giedo van der Garde, became a thorn in their side. Media propounds that he turned up to the season-opener Australian Grand Prix, ready to race. Eventually, the matter went to Court with van der Garde seeking to claim his guaranteed 2015 spot but then ended up settling with the Swiss Constructor.
Methods for Regulating Driver Contracts
Such instances expose the caprice driver contracts are subjected to in Formula One. Money matters run on the highest pedestal, influencing almost all contracts and the above mentioned are but limited illustrations. One only needs to trace the history of the driver market in Formula One to find such issues surfacing every other season. This gravity of uncertainty of contracts has to be analysed in the context of the limited participants of the Sport. As stated before, with only ten constructor teams and numerous drivers, the market is palpably skewed. Such a significant difference in bargaining powers means that it is not difficult for drivers to lose their seat despite good performance and consistent results.
Thus, one is left questioning about the methods for regulating contracts in Formula One to assure security to the drivers and teams in the face of the fast-evolving nature of the sport. Formula One already has one mechanism in place in the form of the Contract Recognition Board (CRB), however, despite the CRB being in operation since 1991, instances of disregarding contracts are yet to see a decline. Therefore, along with an analysis of the powers and functions of the CRB we also need to look at other methods which could assist in regulating contracts such as setting deadlines for registration of driver contracts.
Contract Recognition Board
The CRB was established in 1991 following one such questionable move of Michael Schumacher from Jordan to Benetton and Roberto Moreno’s ousting from the latter. The primary purpose of CRB is to deal with disputes over conflicting driver contracts by way of ad hoc arbitration. It is also responsible for registering driver contracts. However, driver disputes are still frequent. Several reasons can be attributed for this. Firstly, CRB comes into play only when there is a dispute between drivers and teams, without any mechanism to curb such instances from taking place. Secondly, instances like the case of Sauber in 2015 show that there are disparities in the functioning of CRB. Thirdly, the intricacies of the operations of CRB are enshrined in the Concorde Agreement, which is between the FIA, the Formula One Group (management) and the constructors, due to which, the details of its working are not properly known even among the participants of the sport.
Thus, to overcome these fallacies, the CRB should be enshrined in the FIA Statutes/International Sporting Code of the FIA so as to collate it with the fundamental rules of the Sport, and resultantly, give it more force. Further, instead of an ad hoc dispute resolution, a permanent body of legal experts and pundits of the Sport should be established, and it should be accorded the power to take suo motu action if any discrepancies are found in any contracts. This would essentially work as a disclosure-based system, where teams are obligated to register their driver and reserve driver agreements and the CRB will have graded powers, wherein at first, it will only ensure that the driver contracts are not wrought with irregularities, and it can inquire with the parties of the contract if it is not satisfied and take action accordingly. The FIA already has a system of appeals in place so teams and/or drivers will have a recourse if they do not agree with CRB’s decision. All the while, the CRB should also retain its powers of arbitration for instances such as Oscar Piastri’s McLaren-Alpine dispute.
Time Limit for Registering Driver Contracts
Driver moves provoking surprise within the paddock and outside are not uncommon in Formula One. Oftentimes teams are not aware of the negotiations of their drivers with other constructors and vice versa. Furthermore, instances of announcements very late in the season leaving some drivers without a seat are also not a rarity. So, to avoid such instances, the FIA can come up with a deadline for registering driver contracts, and the driver lineup for the next season. They should be required to be registered with the CRB towards the end of the previous season, or the beginning of the winter break. Most of the development of Formula One cars for a season is finished before the previous season ends and the winter break is generally reserved for the finishing touches, so if a driver is dropped at the end of the season, or if a team loses a driver at the very end of the season, it is difficult to find a replacement. Therefore, if a deadline is fixed before which all transfers and moves have to be finalised, both the teams and drivers would have surety going into the final leg of development for the next season. For instance, the majority of the confusion with regards to Piastri’s contract could have been avoided if Alpine had registered his contract with the CRB earlier.
Conclusion
The examples mentioned in the present article are but few of the many such instances occurring season after season. To reiterate, with the tough competition and limited seats, it is not difficult for drivers to lose their seats despite good performance. Therefore, a couple of methods to regulate contracts have been explored hereinabove. Another route which has not been discussed above is that of collective bargaining under the aegis of the Grand Prix Drivers’ Association. This is due to the following reasons: firstly, the GPDA is still nascent, meaning it lacks the cohesiveness required for collective bargaining to be effective; and secondly, drafting a collective bargaining agreement will not be cost effective because there are limited participants, and the driver contracts are complex and often starkly varied. Hence, while the GPDA matures, the above mentioned methods can be employed after tailoring them to meet the requirements of Formula One.
*For any query, feedback, or discussion, Pranjal Shah can be contacted at [pranjalashah@gmail.com]
*NOTE- The opinions and views expressed in this article are that of the Author(s) and not of SLPRR- the expressed opinions do not, in any way whatsoever, reflect the views of any third party, including any institution/organisation that the Author(s) is/are currently associated to or was/were associated to in the past. Furthermore, the expressions are solely for informational and educational purposes, and must not be deemed to constitute any kind of advice. The hyperlinks in this blog might take you to webpages operated by third parties- SLPRR does not guarantee or endorse the accuracy or reliability of any information, data, opinions, advice, statements, etc. on these webpages.
PREFERRED CITATION: Pranjal Shah, Regulation of Driver Contracts in Formula One: Is It Time to Devise New Methods?, SLPRR, <https://sportslawandpolicyreviewreporter.com/?p=2597> February 14, 2023.
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