Peace For Our Time?

Neville Chamberlain
Heston Aerodrome, 30th September 1938

In 1938, on his return to England from crisis talks in Germany, British Prime Minister Neville Chamberlain proclaimed “Peace for our time,” as he waved aloft a piece of paper which contained a signature from the German Chancellor Adolf Hitler, “symbolic of the desire of our two peoples never to go to war with one another again.”

“Go home and get a nice quiet sleep,” he willed his people.

Less than a year later, the world was at war.

Chamberlain’s speech has since become one of the most studied and infamous pieces of political naivety. In over-estimating his counterpart’s good will and similarly under-estimating his counterpart’s political savvy, Chamberlain’s promise of peace wasn’t worth the paper upon which it was written. A lesson for all. And a lesson for us.

Anyone who believes that the recent capitulation of Jean Todt and Bernie Ecclestone is a sign of the ending of hostilities in the fractured world of Formula 1 politics is gravely mistaken.

The qualifying argument was never supposed to get this big. I firmly believe that the resolve of the teams to stay united took everyone by surprise. Perhaps even the teams themselves. But they must be careful neither to judge this success too positively nor to take from it excessive confidence or bravado. It was simply one small battle at the start of a far larger war.

What we must never lose sight of, is that Bernie doesn’t give up a fight when he already has the advantage of the political high ground. Not without a damn good reason. Not without an alternative advantage being won by doing so. And so I simply can’t bring myself to believe that Todt and Ecclestone backing down on this subject can be viewed in the simplistic narrative of an overwhelming victory for the teams. Indeed, in the long run the supposed weakness of Ecclestone and Todt and their apparent capitulation could come to be seen as a quite brilliant masterstroke of political manoeuvring.

The stakes have not changed. This is still about the controlling rights of the governance of the sport. The teams want a greater say and after this success will feel emboldened. But by showing their strength and playing their hand so strongly and so soon, there is a bitterly ironic twist that they may just have laid the foundations for their own defeat.

Bernie Ecclestone and Jean Todt
Monaco Grand Prix 2014
c/o James Moy Photography

To find out why, we must start in the South East of England. It is this part of the world that Anneliese Dodds, a British Labour politician, represents at the European Parliament. Having received representations over anti-competition from numerous engineering firms within her constituency, she made a complaint to the European Union Commission (EC) over the governance structure of Formula 1, the position and authority of the Strategy Group, and the role of the FIA.

The roots of Europe’s involvement in Formula 1 go back a decade and a half. In 2001, an EC investigation into the dual regulatory and commercial role of the FIA concluded that the FIA had abused its position and had acted in an anti-competitive manner. A resulting EU Directive meant the FIA had to modify its position within the sport to become concerned solely with a role “limited to that of a sports regulator, with no commercial conflicts of interest.”

As such, the commercial rights of the sport were sold by Max Mosley’s FIA to a Commercial Rights Holder, Bernie Ecclestone, for a period of 100 years. The payment was a one-off figure of $313 million. The FIA thus withdrew from the business side of the sport in order to ensure its own independence from any commercial aspects of Formula 1. At the same time Ecclestone, as the Commercial Rights Holder, had to give up any positions he held at the FIA.

In short, the Directive forced upon Formula 1’s governance a complete Separation of Powers. Today, however, the governance structure of Formula 1 lies in a convoluted mess. The clear lines prescribed by European law have been blurred. The Separation of Powers has turned into a Fusion of Powers.

If one starts with the Strategy Group, Ecclestone as Commercial Rights Holder holds six votes, the same number as the FIA President, with a further six votes divided between the represented Formula 1 teams. The F1 Commission then sees every Formula 1 team represented, along with some circuit promoters, sponsors and suppliers. Bernie Ecclestone sits on the World Motor Sport Council, the most powerful rule-making body in the FIA’s system of governance.

The current Concorde Agreement lasts until 2020. Ecclestone has individual contracts with the teams, as part of Concorde, that last until then. Contracts with which he is no longer pleased. A Concorde Agreement with which Todt is also unhappy.

Three years ago, in a move to ensure a new Concorde Agreement was signed, the FIA accepted a yearly payment from the Commercial Rights Holder of $40m. It is said this is why the teams were invited to the table through the Strategy Group. At the same time, the FIA was offered a 1% equity stake in Formula 1 on the occasion of its flotation on the stock market. But while that flotation did not take place, the 1% equity shareholding did go ahead as the FIA purchased the stake for a reported $400,000. This 1% of F1 adds an estimated $120 million per annum to the governing body’s coffers.

As Dodds has argued to the EC, “It is very unusual for a regulator to have a financial stake in what it is regulating. Recent developments are akin to the Food Standards Authority taking a stake in McDonalds.”

A tangled web indeed.

A new Concorde Agreement
Hungaroring, Budapest, 2013
c/o James Moy Photography

And so we move to the complaint raised at the EC. In the first instance it was responded to with a letter tantamount to a brush off, but last year Force India, Lotus (now Renault) and Sauber followed up Dodds’ complaint with one of their own.

“We submitted our complaint,” Force India’s Bob Fernley recently told Reuters. “The complaint has then gone to CVC. CVC have responded back, which we have a copy of, and then we have to reply again to that final part of it. Then they’ll look at it. It’s going through the process.”

In the meantime, the Sauber Formula 1 team lies in desperate financial straights. With question marks over its continued participation in the sport, one might assume Formula 1 would leap to the aid of a team which had asked the EC to investigate anti-competitive practices within the sport, a distribution of funds it claimed was unfair, and a cartel-style system of governance in which the richest teams had all the power. And at any other point it might have done.

But what if Formula 1 does not come to the aid of Sauber? What if allowing the team to fail promotes the EC to look far deeper into the manner in which Formula 1 is run? What if that’s precisely what those we think have lost the qualifying battle want the EC to do?

Because if the EC takes even a cursory glance at the events of the last few weeks it will see that the supposed “sole regulator” of the sport has been over-ruled by its own competitors. It will find a sport in which the governing body with which it imbued the sole responsibility of governance, cannot govern. It will find a system of law making in which the commercial interests it decreed must be separated from governance have become inextricably entwined.

Dodds has already requested that the EC front a deep and thorough investigation into the governance structure of Formula 1, calling on Europe to not allow itself to be left behind as it was by Switzerland and the USA in their investigations of FIFA.

Given the EU Directive, it seems entirely possible that the result of a new European investigation could be for the EC to tear up every shred of the governance structure that we know and force the sport to rewrite it all. Bernie would get to erase the deals he’s done with the teams and come up with new, more favourable terms under a new Concorde. The FIA would have to give up its $40 million sweetener and 1% equity stake, thus putting $160 million a year back in the pockets of the Commercial Rights Holder and CVC. Little wonder Ecclestone has always stated he has no issues with the EC taking a deeper look at the sport’s governance.

While financially the FIA would take a hit, procedurally an EC investigation might also benefit the governing body. Because if the decisions taken 15 years ago are upheld, the FIA would once again become sole regulator and absolute authority in the sport. All legislative power would return to the Place de la Concorde.

What happens to Todt would be less clear. While there is no suggestion of any FIFA-style misdemeanour in terms of personal financial gain, the two deals that most brazenly contravened the EU Directive, in that they merged commercial and governing interests in F1 bringing $160 million to the FIA annually along with them, were both signed by the FIA President. While Max Mosley wasn’t forced to stand aside after the last investigation, any suggestion of the incumbent FIA President essentially selling the independent status of the Association might not play out so well for a man with ambitions of landing a prominent role at the UN.

When it comes down to basics, an EC investigation could see the sport forced to return to a point at which the FIA concerns itself solely with making the rules, the teams bite their lips and go racing, and the Commercial Rights Holder promotes the product and makes the money. As was ever the case in Formula 1 politics, when the guns stop firing and the smoke clears the air, it is Ecclestone who is left standing. It is Bernie who wins.

Far from the teams holding the balance of political power their small victory might suggest, their very show of strength in recent weeks might yet come to form the basis from which they have it all taken away.

This fight was always about far more than just qualifying.

The teams might have won the battle. But did they just lose the war?