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FERRARI-GATE FIASCO: THE CONTROVERSIAL CONFIDENTIAL AGREEMENT BETWEEN FIA AND FERRARI

Updated: Apr 9



The post has been authored by Archit Uniyal.


  • Archit Uniyal is a third-year undergraduate student of BBA LL.B. student at Jindal Global Law School. He has a deep and fond interest in the field of Sports Law and aims to pursue a vibrant career in the same.


INTRODUCTION


The 2019 Formula One (“F1”) season came to an end on the 1st of December with Lewis Hamilton securing his 6th World Drivers’ Championship, Mercedes winning the World Constructors’ championship for the 6th straight time (tying Ferrari’s record from 1999 – 2004) and Ferrari’s recruit Charles Leclerc storming to a total of 7 Poles in his rookie F1 season. Yet, the most talked about incident of the 2019 season was Red Bull Driver Max Verstappen accusing the team of Scuderia Ferrari of cheating. This hot debate has resurfaced yet again in March 2020 after it was reported that Seven Formula 1 teams have come together to threaten legal action against the FIA for signing a confidential agreement with Ferrari regarding the uncertainty over its 2019 power unit.


WHAT LED TO SUSPICIONS FROM FERRARI'S RIVALS?


Suspicions had long lingered in the paddock regarding the way Ferrari operated their power unit as rival teams believed they had managed to circumvent F1’s strict fuel flow or oil burn consumption regulations to enhance the engine power. It was surmised that the circumvention was put to action by exceeding the maximum fuel flow and inducing the Federation Internationale de l'Automobile (“FIA”) fuel flow sensor to give a falsely low reading. This query came amid speculation about Ferrari's engine performance this season, with rivals trying to work out how it has been gaining half-a-second over their closest rivals on the straights in qualifying.


Things went off like a grenade in the F1 world after the United States Grand Prix. Red Bull’s driver Max Verstappen referenced the Ferrari's lacklustre performance at the race with the remark that it is "what happens when you stop cheating". Verstappen's comments were strongly criticised by Leclerc, Vettel and the Ferrari team obliging the governing body to examine the matter in-depth. Before the US Grand Prix, the FIA had stated about introducing new fuel regulations and adding to the intrigue, Ferrari appeared to lose performance in the latter stages of the season. Rivals including Honda were adamant that Ferrari had lost straight-line performance at Austin, but the Ferrari officials emphasised that it didn’t make any changes to the way it operated its engine after it performed poorly at the very next race after the new technical directive that effectively outlawed a clever way of increasing fuel flow was given out by the FIA.


FIA’S INVESTIGATION AND THE BACKLASH FROM THE RIVAL TEAMS


During last year’s Mexican Grand Prix, an FIA official admitted to ‘RaceFans’ that they had checked Ferrari’s entire fuel system but failed to find any glitch. Mercedes and Red Bull were particularly angered about how Ferrari was gaining the advantage but never actually made a formal protest at that time. According to the Reporting and Benchmarking laws mentioned in Appendix 8 of the 2020 Formula One Sporting Regulations, the competitors had 14 days from those results being posted, or four days before the FIA prize-giving, to launch a right of review. Article 2.7 of F1’s technical regulations makes it compulsory that the FIA and the stewards have to be satisfied by the competitor that its car complies with the regulations in their entirety at all times during an event, and it is clear that Ferrari has done precisely that reading the FIA report.


Following the investigation and not uncovering any wrong-doing in the conclusion, the FIA released a statement on the matter saying that it had: “reached a settlement with the team” but that the “specifics of the agreement will remain between the parties”. This kind of settlement has never happened in Formula One file but one of the likely reasons for the FIA electing to reach a settlement over the Ferrari matter is that it was unable to prove beyond doubt that the team had broken the regulations. In such a stalemate scenario, the options that were in front of the FIA were either to reach an agreement to move on or take it further and go to court. According to the Rule, 11(f) in Appendix 9 of the 2020 Formula One Sporting Regulations, the statutes do offer the chance for the governing body to open a disciplinary inquiry in case of any alleged material breach or alleged material failure to comply with any of the obligations. The matter is then submitted to the FIA International Tribunal.


Article 4(i) of the 2020 FIA Judicial and Disciplinary Rule allows the FIA to conduct an inquiry into any actions or conduct of a person suspected of having committed one of the offences. Article 4 (ii) of the FIA Judicial and Disciplinary Rule states that after the inquiry, and in view of the information gathered during it, the prosecuting body may draw up an inquiry report and decide: a) to close the case, or b) to bring the matter before the International Tribunal. It also says that the prosecuting body may also enter into a settlement agreement to terminate the procedure. In the case of Ferrari, the FIA, in compliance with Article 4 (ii) of its Judicial and Disciplinary Rules (The confidentiality of the terms of the Settlement Agreement), to avoid the negative consequences of lengthy litigation and also in the best interest of the Championship and its stakeholders, could have decided to enter into an effective and dissuasive settlement agreement with Ferrari to terminate the proceedings. Such agreements are legal tools recognised as an essential component of any disciplinary system and are used by many public authorities and other sports federations in the handling of disputes.


The statement made by the FIA in the conclusion of the statement has left the majority of teams indignant and exasperated. The seven teams - Mercedes, Red Bull, McLaren, Renault, Racing Point, AlphaTauri and Williams jointly issued a statement strongly objecting to the FIA reaching a confidential settlement agreement with Ferrari to conclude this matter and demanding full transparency on the issue. They also made it clear that they have the right to seek legal redress if the FIA doesn’t treat all competitors fairly and equally. Article 9.1 of 2020 FIA Judicial and Disciplinary Rule grants to all the Formula One participants, the right to appeal against any sporting decision or interpretation or application of the FIA’s statutes in The FIA International Court of Appeal.


WHAT HAPPENS NOW?


The wordings in the statement released by the FIA falls drastically short in absolving Ferrari from the dispute. In fact, the conduct and response of the FIA throughout the matter, raise critical suspicions on the Ferrari camp. Further, the fact that ‘a settlement’ was reached implies that FIA did find something fishy in the matter. But a settlement is one thing, a publicly-declared settlement is quite another. The fact that FIA chose to release the statement suggests that there is indeed some conflict between Ferrari and the FIA. This indicates that the settlement was an alternative to a legal dispute, with probably Ferrari refusing to accept a sporting penalty and threatening to challenge any such ruling.


Under Article 4(iii) and Article 4(iiii) of the FIA Judicial and Disciplinary Rule, FIA may grant immunity to a suspected team if they provide enough evidence or cooperate with the FIA regarding the future investigation. All this information is inserted into a document signed by the FIA president and the by the person benefiting from the immunity. In this case, FIA didn’t reveal any details regarding why it granted immunity to Ferrari. The explanation given by FIA is unlikely to placate the seven teams as not only did the FIA admit that they were unable to prove whether Ferrari’s engine was legal or not, its dithering conclusion will also raise doubts regarding how the governing body will police the sport going forward. One avenue for teams could be to ask the FIA to take the case of Ferrari to the FIA International Tribunal under Article 5 and 6 of the FIA Judicial and Disciplinary Rule; especially if they have more detailed information regarding the Ferrari’s camp power unit, more than what the governing body has been made aware of up until now.


The author can be reached for comments on his email at 17jgls-auniyal@jgu.edu.in


Cite as: Archit U., Ferrari-Gate Fiasco: The Controversial Confidential Agreement between FIA and Ferrari, Extra-Cover, The Sports Law Blog of India (7th Apr 2020), Accessed at https://www.extra-cover.org/post/ferrari-gate-fiasco-the-controversial-confidential-agreement-between-fia-and-ferrari [Date of Access].


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