Formula One and Beyond

by Max Mosley

  On 20 January 2000 there was a postscript to the UK tobacco saga when Bernie and I were called to give evidence to the House of Commons Health Select Committee. The line the committee took was that we had a moral duty to rid Formula One of tobacco branding. In response, I pointed out that we had no power to stop the teams – they were independent businesses and tobacco sponsorship was not illegal. If we brought in a rule to stop it, we would immediately be challenged in the courts.

  But, I said, apart from the legal position, the teams had another reason to refuse. I told them:1

  . . . Their second point, and it is one on which the Committee might be able to help us, is that if the EU is serious about trying to stop the publicity from tobacco, they could do so overnight because the EU currently subsidises the growing of tobacco to the tune of 998 million ecus, the 1997 figure, which is probably in the order of two to three times as much money as the whole sponsorship of Formula 1. By contrast, they pointed out to me, not only are these 998 million ecus going to grow tobacco, the total EU budget for combating cancer is 14 million ecus and for health initiatives generally 37 million.

  823 [Chairman] We have looked at this in some detail in this inquiry, as you might imagine.

  (Mr Mosley) Good. I just wanted to make that point—

  824 [Chairman] It is a very important point; we understand that.

  (Mr Mosley)—that I had difficulty in convincing the teams that their position is morally difficult when confronted with this action by our Government.

  Then later in the discussion (at 857) I couldn’t resist starting again:

  . . . Every single member of the Committee has voted in favour of the 998 million ecus EU subsidy in the EU for growing tobacco by the mere fact of allowing this through the House of Commons. That is inescapable. Please do not let us get into the morality debate because we are all equally guilty, in fact I would submit the Committee is in a weaker position than I am because you could do something and I cannot.

  [Chairman]: I think we might be trying to do something.

  I have to confess I quite enjoyed the hearing. I was politely accusing them of being ineffectual hypocrites and I think some of them, at least, got the message.

  While all this was going on, I remained a member of the Labour Party. Having joined in the mid-1990s at David’s suggestion, I had made a lot of friends and useful political contacts. However, I felt I had to end my membership because of the invasion of Iraq. I thought it quite wrong for many reasons and I could not belong to an organisation that (officially at least) supported it. My Labour friends didn’t think it was a good idea for me to join the huge anti-war demo in Hyde Park, but I nevertheless quietly attended.

  In 2003, notwithstanding my opposition to the war, there was an intriguing interaction with the British military. They were interested in reducing the time taken to refuel and rearm the Apache helicopter. Doing this quickly was crucial because they were vulnerable when being refuelled anywhere near to the enemy. Also, shortening the time meant each one could fly more missions in a given period. The army sent some people to look at refuelling in Formula One, and eventually I arranged with them that Nick Wirth would go to the Army Air Corps base in Middle Wallop and see what he could advise. The result was a different approach and a substantial reduction in the time taken to refuel and rearm. As a reward, they brought an Apache, which was then very new, to Silverstone and demonstrated it at the 2003 British Grand Prix. Our ability to make a significant difference in an area far removed from sport showed how much Formula One technology had evolved in the previous three decades.

  19

  THE COMMERCIAL RIGHTS TO FORMULA ONE

  By the time I was elected president of FISA in 1991, the Formula One arrangements had evolved and Bernie was more in control than ever. The teams seemed quite happy and, as far as I was concerned, even if they and the organisers had ceded all their rights to him and the FIA had never really owned any of the rights to the races, it was still the FIA’s Formula One World Championship. Yet, strictly speaking, the fact that the FIA had launched the championship in 1950 and supervised and regulated it ever since gave us no legal security. We couldn’t claim to own very much apart from rights to the name, the race format, the technical rules and the International Sporting Code – and some of those could have been disputed or challenged in court.

  Everything apart from the exercise of the sporting power as regulator had either never belonged to the FIA or was now governed by contracts. Even our right to decide the calendar was gone because the Concorde Agreement specified that an event could only appear on it if the promoter had a contract with the teams. They, of course, had long since delegated the right to make these contracts to Bernie. And in 1990, well before I had any thought of standing for election, a new Concorde Agreement lasting until 1997 had been signed.

  Irrespective of who ‘owned’ it, the championship was effectively controlled by the teams because of their rights under the Concorde Agreement, and it had suited them to hand everything over to Bernie. On top of this, he had acquired the media rights (particularly television) that had always belonged to the promoters.

  After my election to the full FIA presidency in 1993, I felt I ought to try to find a way of acquiring the rights to the championship for the FIA. It had developed enormously since the days when it was a collection of individual events with different formats run by FIA member clubs, loosely grouped together as a championship. Although this was still the pattern for our other championships, for example the FIA World Rally Championship, the Formula One World Championship was now a homogenous entity with all events run to the same format. It therefore needed to be treated as such. From my perspective as FIA president, it was our championship and we should own it, or at least keep control of it, even if its current pre-eminence had been achieved in spite of the FIA and not because of it.

  The question was how. After internal discussions in the FIA, we decided on a long game. The FIA’s receipts from Formula One exceeded its expenditure, which made the current situation sustainable. The FIA had the calendar fees from the race promoters plus annual entry fees from the teams. We also received a modest annual fee from Bernie in return for exercising sporting oversight. Balestre had demanded this in the late 1980s because by then the numbers of FIA personnel required at races had ballooned over the past decade.

  I proposed an arrangement to Bernie that would fundamentally change the game. Where previously the Concorde Agreement was between the teams and the FIA and the teams then contracted with Bernie, the new idea was an agreement directly between the FIA and Bernie, an agreement between Bernie and the teams (for the money he paid them) and a contract between the FIA and the teams to govern rule-making, essentially the Concorde Agreement. It would be a triangular arrangement where previously it had been linear. Contractually, the teams had always stood between the FIA and Bernie, but this new structure would mean we in the FIA now had a contract directly with the person who held all the relevant rights to the races that made up our championship. To me this seemed a more logical arrangement.

  The attraction for Bernie was that we would continue to oversee the championship for the relatively modest annual fee which Balestre had arranged in the 1980s (about FF40,000,000 linked to inflation, circa €6.1 million) plus, of course, the calendar and entry fees for the next 15 years. But, at the end of the 15-year span of our new deal (1 January 2011), Bernie would transfer all the rights, archives, footage etc. that he had accumulated over the years to the FIA. We would become the sole owners of the commercial rights to the World Championship as well as Bernie’s rights in the underlying events. This seemed the best way to deal with what had become very complex arrangements. The legal difficulties of any attempt to untangle everything without an agreement would have been formidable, perhaps even impossible, and likely to threaten the championship itself. It was necessary to cut the Gordian knot.

  Surprisingly, though, it was difficult to persuade Bernie to agree. After all those years I t
hink he felt somehow allied with the teams. His original exit strategy entailed getting his business valued at some point and selling it to the teams at a significant discount. Indeed, in the early 1990s he had lengthy discussions with them about what became known as the ‘Dying Agreement’. I was not involved but understood this concerned arrangements for the teams to acquire the business from his estate in the event of his death. In the end, I convinced him that his arrangements with the teams were a separate matter and that he would be better off working with the FIA, but it was a long process.

  Inevitably, my relationship with Bernie changed after I was elected to head the sport then, later, the entire FIA. We remained friends and often met. Apart from swapping jokes and anecdotes about others involved in Formula One, there was a great deal of common interest between Bernie’s business and the FIA. Both relied on the success of Formula One and needed to promote and encourage its growth. But there were also areas of conflict because Bernie maintained a steady pressure to wrest more control, particularly in the paddock at races. This did not affect me directly but caused difficulty for our staff.

  Understandably, perhaps, Bernie always liked to interpret everything in his favour. For example, the fact that he had the promotional rights to Formula One led him to try to stop the FIA having the maker’s logo on any of the technical equipment we used. He would also try to minimise the exposure of our own logo. I used to tell our staff he was like the person in the next seat on a flight who would take over the armrest if you left it clear for a moment – they had to be constantly on the alert to stand their ground. But on the whole relations were good. Things generally worked well, although never as closely as some of the teams seemed to think. One of the reasons the teams thought we were closer than we really were was that Bernie would go out of his way to give the impression he was in charge. For example, if I told him I was going somewhere he would often give people the idea he had arranged it. I was always quite relaxed about that sort of thing because I had known since 1982 where power over the sport lay if it really came to it.

  Once Bernie had finally accepted, I put the proposed contract to the 1995 FIA General Assembly where it was agreed. Fourteen years on from Balestre’s original proposals for the first Concorde Agreement, I had succeeded in the FIA’s long-term quest to own the rights. And, crucially, this time Bernie himself had a contract with the FIA so, at least in theory, there should be no problem with him (or his successor) when the time for the handover came. Part of the arrangement was that he would not enter into any contract with a race promoter or television company that extended beyond 31 December 2010, when he was due to relinquish his rights to us. In practice, he could have sought our agreement if he had needed to sign a longer contract. We would then have become a party to it and participated.

  Some of the teams were not pleased. Ken Tyrrell, in particular, was very unhappy, saying that Bernie had no right to do this. He said the championship belonged to the teams because without them there would be no championship. I thought that was nonsense: I told Ken you don’t get to own a theatre just because you perform in it every night. If anyone might have a claim on them it was the promoters, who had originally owned the rights and run events in the championship for many years before Bernie started his business, but not the teams.

  I didn’t worry too much about the competition law point. I knew that the FIA would have difficulty exercising Bernie’s commercial rights when they became ours in 2011 because we might then be considered to be in an excessively dominant commercial position under EU law, but I thought the FIA could deal with that problem if and when it arose. At worst, the FIA could sell the rights – perhaps even to Bernie, if he were still around. The important thing was to make sure there was still a viable championship in 2011.

  Notwithstanding the uncertainties after 2010, there was an immediate and important benefit from the FIA’s point of view. The deal drove a wedge between Bernie and the teams and put him much more clearly in our camp. I knew from the FOCA–FISA war that the teams could cause real trouble if they were properly financed, and that danger was significantly smaller now we had a contract with Bernie. The possibility of Bernie (or a successor) combining with the teams to run outside the FIA was eventually eliminated altogether in 2000, when our deal with the EU Commission meant we could stop non-FIA events running on any permanent circuit. But even with this, the convulsions caused by using our powers against a combination of Bernie and the teams would have been destructive. It was much better to have him with us.

  Two years later, in 1997, on the basis of this 15-year deal, Bernie decided to float his business on the stock exchange and planned an initial public offering or IPO. His financiers, however, told him he needed a longer contract and he came back to us to ask for a ten-year extension to 2020. After an internal discussion, we agreed to do so for $300 million. Coming up with a figure involved an element of guesswork, because it meant trying to predict the value of contingent future rights in a market with an evolving championship and technology.

  We pitched our figure high because we knew we could always reduce it if Bernie balked. We also knew he was likely to get a large sum from his IPO. On the other hand, what we were offering would not take effect until the current contract expired, so not for another 13 years or so, and even then there were uncertainties about ownership of the various rights. For us at the time, the prospect of receiving a large sum of money for a ten-year extension seemed a good deal. When I first suggested this figure to Balestre, by then president of the FIA Senate, he thought it was unrealistically high. I got the full ‘Quoi? C’est pas possible!’ treatment.

  Although it was way beyond anything Balestre thought feasible, Bernie at first agreed, or at least pretended to. He could afford it if he succeeded with his IPO and he needed the FIA onside to keep the financiers comfortable – but I knew that once he had an IPO in the bag, he would probably try to renegotiate. This was how he operated. And as he himself always says, the old tricks are always the best ones.

  With all this talk of flotation, some of the teams began finally to understand just how much money Bernie was making. As already explained, when they all refused to join in the risk-taking 20 years earlier, Bernie had himself eventually accepted the risks of promoters defaulting and guaranteed the teams an agreed amount of money for each race, which later became a fee for the entire season. But by the late 1990s, he was getting much more money from the Grand Prix organisers than he was paying the teams. He was also making money from television and other sources. On top of this, the teams realised that the FIA’s 15-year deal direct with Bernie had changed things – he was now more allied to us than them. Some of them set out to stop Bernie’s IPO unless they could participate.

  It began with stormy meetings, at one of which, extending my theatre analogy, I pointed out that even if you dined in a certain restaurant each night, and even if you did so for years, that didn’t in some way make you its owner or entitle you to shares in it. And, I said, it was our restaurant. Bernie was the chef, a very talented chef who had built the restaurant up, but it was still our restaurant. We had founded it in 1950, before any of them except Ferrari had any involvement, and that included Bernie.

  Privately, Bernie used to say to me: OK, but if he left to open another restaurant down the road, then where would the FIA be? He had a point – quite a strong one – and I was always careful never to adopt a position that would provoke unity between Bernie and the teams before we had our contract with him. Together they could have been a problem, but as long as Bernie had a binding contract with us, the teams could do nothing. As already mentioned, this was another reason why the long-term deal we had just made with Bernie independently of the teams was so important. As it developed, much of the discussion took place in the shadow of an ongoing investigation by the European Commission and before its ruling eventually put us in an even stronger position.

  20

  THE CAR MANUFACTURERS GET INVOLVED

  Resentment against Be
rnie and the prospect of him becoming a billionaire grew. One of the team principals later boasted that he had single-handedly stopped Bernie’s IPO, but this wasn’t quite true. The real damage was done by a major car manufacturer with good connections in Brussels, particularly in the Competition Directorate then still headed by Karel Van Miert, and the resulting investigation stopped the flotation. Bernie nevertheless got his money, or some of it, in 1999 by selling a $1.4 billion bond, redeemable in 2010 at the end of his existing contract with the FIA. The money was secured on his media contracts and commercial rights. It put our $300 million proposal for a ten-year extension to take effect in 13 years’ time into perspective and made it look rather optimistic. But inevitably the FIA was drawn into the proceedings that began as Bernie’s dispute with the Competition Department of the European Commission.

  After the dispute with the commission was resolved by means of a novel approach to the length of our contract with Bernie (covered in greater detail later), we were able to offer a long-term deal for Formula One with the commission’s agreement. This settlement piqued the interest of the major European car companies and I twice met Paolo Cantarella, then chairman of the European Automobile Manufacturers’ Association, who suggested his members would like to make a collective offer. I encouraged him but he produced nothing concrete because, I suspected, his lawyers were saying the situation was risky due to Bernie’s existing contracts and rights and the uncertainty about what we could actually sell.