Under FIA financial regulations, this is a potential outcome if a team breaches the cost cap limit, as many expect.
However, no one knows which sanctions from a list of possible sanctions described in the rules are likely to be applied, given that there is no precedent.
These rules contain a long list of violations, mostly related to teams not reporting their expenses accurately or on time, or trying to evade the cost cap administration. [CCA]the body responsible for monitoring compliance.
On Tuesday, we heard of the first such offense, albeit a minor one, when Williams was fined $25,000 for not filing his 2021 paperwork by the March 31 deadline.
However, the most important sections of the financial regulations relate to simple cases of expenditure exceeding the limit.
These breaches will be referred to the Cost Cap Arbitration Committee [CCAP], which is a group of 6 to 12 judges proposed by the FIA and by the teams. Any decision they make can then be challenged by the team concerned, or other parties, before the International Court of Appeal.
Overspending, whether the numbers voluntarily reported by a team in advance or those discovered later through a survey, falls into two categories.
There is a simple breakdown at 5% of the cap: a lower overshoot is considered a “minor overshoot”, while anything over 5% is a “hard overshoot”. The latter case is taken much more seriously.
This figure of 5% is not negligible. Teams are currently targeting $140 million plus $1.2 million for Race 22, for a total of $141.2 million in 2022. So a 5% breach represents additional spending of approximately $7 million. dollars – which equates to a massive amount of R&D, potentially enough to make the difference between winning or losing the title.
Nicholas Latifi, Williams FW44, makes a save
Photo by: Sam Bloxham / Motorsport Images
The rules note that if exceeded by less than 5%, the CCSI “may impose a financial sanction and/or any minor sporting sanction”.
The pecuniary penalty is simply defined as “a fine the amount of which will be determined on a case-by-case basis”. A fine might be seen as a slap on the wrist for an organization that literally has more money than it can spend, but of most concern to teams is the menu of minor sporting penalties, including “one or more ” can be selected.
The least painful sanction is a public reprimand, although a manufacturer-backed team like Mercedes would be a bit embarrassed to receive.
More dramatic alternatives are the deduction of manufacturers’ or drivers’ championship points in the relevant season.
Then there is what is awkwardly defined as “the suspension of one or more stages of a competition or competitions, excluding for the avoidance of doubt the race itself” – which in effect means being forced to miss workouts.
There are also two penalties affecting 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”.
What if a team exceeds the limit by more than 5% and enters the “material sports penalty” zone?
In such a case, one element of the sanction is clear – the CCAP “will impose a deduction of the constructors’ championship points”. In addition, he “may impose a financial sanction and/or any other material sporting sanction”.
All penalties for a minor infraction remain optional, with the exception of public reprimand.
However, two additional and heavier penalties are added to the menu, namely “suspension of a competition or entire competitions, including for the avoidance of doubt the race itself” and, more dramatically, “exclusion from the championship “.
Charles Leclerc, Ferrari F1-75, the peloton far away at the start
Photo by: Steven Tee / Motorsport Images
It remains to be seen how a sanction is chosen by CCSI from the range offered for minor and major infractions, but the rules make it clear that circumstances will play a role. Essentially, if you cooperate with the CCA and FIA auditors, and are open and honest, you are potentially better off.
Aggravating factors include “any element of bad faith, dishonesty, willful concealment or fraud”, “lack of cooperation”, a record of “multiple violations” during the year or violations during a previous year, and the “quantum of violation”.
On the other hand, mitigating factors are considered “voluntary disclosure”, “compliance history”, “full and unhindered cooperation” and, perhaps most importantly, “unforeseen force majeure events”.
Will teams be able to use global inflation, citing the role of the conflict in Ukraine as a key factor, as force majeure?
Those expecting to breach the cap are certainly well aware of the relevance of the 5% threshold and the lesser penalties associated with it. However, they don’t know exactly how these penalties will be meted out, so even aiming to stay within that 5% is a bit of a gamble.
“In the regulations, there is a threshold, which is 5%,” explains Ferrari boss Mattia Binotto. “If you don’t exceed the 5%, in addition to the budget cap threshold, it will be considered a minor violation.
“And what is a minor breach in case of force majeure? What will the stewards and the FIA decide on this, in terms of penalties? No idea.
“But I don’t think there’s a way for us – and many teams – to just stay inside.
“And even firing people, I don’t think that’s a good and good choice. It’s already summer. The moment you organize it, and you do it, the advantage it may have is not enough to meet the excess prices and costs that we have.
Christian Horner, Team Principal, Red Bull Racing, chats with Mattia Binotto, Team Principal, Ferrari
Photo by: Carl Bingham / Motorsport Images
Binotto is adamant that without an upward adjustment to balance inflation, the rulebook will be broken by multiple teams.
“What will be the implications?” said the Italian. “For me, the most important thing is that many teams are going to violate it. And that, I think, will just be bad for financial regulation.
“And we will start debating whether financial regulation is useful, does it work? And bring everything up for discussion. And I think, again, to avoid that, because it’s important to have a ceiling somehow, I think the only way is to breathe, to take a little more time and try to do a better and proper job for next year and the next.
Red Bull’s Christian Horner makes an intriguing point about how some might try to hit the 5% threshold, in typical F1 fashion of pushing the limits.
“I think all the big teams are definitely going to break that 140 tally this year,” he said. “As Mattia pointed out, there is a 5% threshold for a minor infraction. What is the penalty for a minor violation?
“And what we don’t want to do is end up playing chicken. In other words, will it increase to 4.9% more? Are we going to 4.7% more? And that would be [worth] an improvement that could be the differentiating factor of this world championship.
Top team bosses are very vocal with the media about the likelihood of breaking the cap, and they have been equally forthcoming at F1 Commission meetings and similar gatherings.
Indeed, they’re not hiding anything and setting the stage for multiple teams to breach the $141.2 million limit, leaving CCSI with the difficult task of handing out penalties when final numbers are calculated after the season.
Nicholas Latifi, Williams FW44, Esteban Ocon, Alpine A522, Alex Albon, Williams FW44 chase the field at the start
Photo by: Jerry André / Motorsport Images
Will CCSI members be more lenient with those who don’t overspend? And how are they going to deal with the fact that teams knew all year they were going to overspend and planned for it when one of the ground rules is that they “must not have higher relevant costs to the cost ceiling”?
The bigger question is whether the CCAP will be bold enough to make a post-season decision on a points deduction that impacts the outcome of the Drivers’ or Constructors’ Championships. Remember that these are judges who operate independently of the FIA and do not carry any luggage.
Removing a title from a driver would be a massive call to make – but you could say Olympians lost gold medals months or years after their events once drug test results trickled in in the system. It’s never too late to punish cheaters.
However, such an F1 result, achieved long after the Abu Dhabi GP, could potentially make the turmoil following last year’s marred finale positively tame by comparison. It would inevitably be followed by an appeal to the ICA which would drag on even longer, while the CCAP can itself review its decisions if new evidence comes to light within three months.
It’s also worth noting that the financial regulations operate with a five-year statute of limitations, creating some leeway for a whistleblower who later left a team to report questionable behavior. Suffice to say that the CCAP could still go back and investigate the 2022 season in 2027…
Are the top teams simply betting that if they all go over the mark but stay within the 5% threshold for a “minor” infraction, they won’t face the toughest penalties, those that impact the outcome of the league? ? It certainly looks like that.
Christian Horner, Team Principal, Red Bull Racing, Carlos Sainz, Ferrari, 2nd position, Sergio Perez, Red Bull Racing, 1st position, Max Verstappen, Red Bull Racing, 3rd position, on the podium
Photo by: Zak Mauger / Motorsport Images