Bernie Ecclestone first filled the room of F1 with himself and his Concorde Agreement that was governing the sport and then he passed his right on, creating a vacuum with self-interests taking over. These are the contracts that once made Formula One work.

[image source]

We are getting into one of Formula One’s key foundations as far as legal and business matters went one day - the Concorde Agreement. This post contains never-before-seen, actual pages of one of the most secretly guarded legal-type documents in sports history. The source material and some key supervision was provided by motorsports journalist Forrest Bond of Racefax.com who first published the 1997 version of the Concorde Agreement in 2005 and was kind enough to provide further pages from the 1992 version and the 1994 amendments. The complete 1997 version can be downloaded from this link.

Formula One has been fighting with some difficulties in the past few years. It is hard to miss this fact if you followed all the overflowing background noise surrounding the sport. It struggles to expand its audience, it is fighting cost matters and it is just unable to present an idea of a car to be driven - which is the cornerstone of the whole business. For example, the current powerplants that were first drafted as 1.5-litre, inline-4 ICEs to be introduced in 2013 wound up being 1.6-litre V6s from 2014 due to a last-minute complaint from Ferrari. The new set of technical regulations originally planned for 2016 were first postponed until 2017 and weren’t even agreed upon by the time the start of the ‘16 season. Individual teams start complaining about the sport and they are swept under the carpet if they come from small teams, panic and knee-jerk reactions arise if they come from big teams. Thus, the game is distorted by dealing with non-important issues instead, such as the revamp of the qualifying system that nobody complained about in the first place.

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What you can gather from these events is the pieces of a power play between teams, principals, advertisers, track owners, the regulatory body and the (former) commercial rights’ owner, Bernie Ecclestone. The cohesion that was once there between these parties has fallen apart seemingly, Ecclestone’s once overwhelming power over the sport is no more as he decided to lease his hard-fought right of being the ‘treasure officer’ to a company for 100 years, which looks at F1 as an easy money-grab.

Before everything went sour, Bernie had been slowly turning the business of F1 into his design - strengthening his position and weakening everyone but one other’s, gathering all the wild cards on the table. He made sure he became Clint’s Eastwood’s character in the final pistol fight of “The Good, the Bad and the Ugly” - winning at all costs, even if it meant rigging the competition. His tandem with Max Mosley - the then-head of the FIA, Eli Wallach’s character in this analogy - made it possible that they had total control of the sport, although it is highly suspicious that he had to turn a blind eye over some of his companion’s actions. The rest of the participants? They were made to believe they had an equal chance in all that - and some of them actually did.

The legal foundations to all this were lain down in a contract that was once known as the Concorde Agreement, which is most likely in a de facto state of AWOL as of 2016.

Being one of the most sought after documents in sports history, the Concorde Agreement has been controlling Formula One as a business venture for 35 years - updated and rewritten from time to time.

In brief terms, the Agreement came out of a politically biased power struggle over some technical regulations in the early 80s, nearly causing the sport to split. Bernie Ecclestone lead a handful of ‘rebel’ teams (FOCA) against the factory ones (Manufacturers) siding with the regulatory body. The disagreement was settled in the first Concorde Agreement, which included the teams passing most of their commercial rights on to their representative, Ecclestone, virtually giving him total control of everything business-related within the sport. Various updates have only strengthened his position over the years.

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The Manufacturers’ side consisted of Ferrari, Alfa Romeo and Renault in the early 80s, while FOCA included the independent British teams (McLaren Williams, Tyrrell, etc.), out of which McLaren and Williams are the ones still present in the sport and only Ferrari represents the late, FISA-siding entity. Renault’s recent fight for the so-called ‘Historical Payment’ in this context has been - in essence - about whether the latest iteration of the team would be recognised as a continuation of one of the two, former Manufacturer teams - one being the factory Renault team, the other being Benetton, which was a former iteration of “the Enstone team” Renault currently ‘occupies’ - or whether it is a brand new team on the former FOCA side (note: Team Lotus used to be in FOCA, but the latest Lotus team - the direct predecessor of Renault of 2016 - had no ties with it).

It might start to make sense why this document has also been kept under secrecy, even when it is no longer valid. Despite all the rumours floating around it, the Agreement is a very straightforward document without lots of special features at first glance. Apart from a few selected pages, the cca 100-page document is very conventional - sealing everyone’s rights and obligations. It is a typical booklet anyone with some dull imagination can picture. The rest of it - about how F1’s inner organisation was structured, how money was distributed, etc. - makes it a superbly interesting read, even when the figures and the singatories are now outdated. For a better understanding of the mechanics of the sport, one can’t miss it.

Let us immerse ourselves in the 1990s then with a look at the 1992 and 1997 Agreements with their historical context in contrast to what F1 is governed by lately.

Bernie united the two camps of individual teams under one commission and brought some key people to the table as well. Everything in Formula One was decided by the F1 Commission. It constituted of 12 people altogether: three of each of the most successful FOCA and Manufacturer teams, one European and one non-European race promoter, two of the most prominent sponsors - one from the FOCA and one from the Manufacturers’ side (the latter most definitely being Philip Morris), a representative of the FIA (Max Mosley at the time) and a representative of the Commercial Rights Holder, Bernie Ecclestone himself, who was also the President of the F1 Commission. Each meeting was to be led by the president or the FIA representative in the President’s absence.

Now, if this reminds you a borderline cartel organisation, you are not far from the truth. But to make matters even more complicated, the F1 Commission answered to what is called the World Motor Sport Council. The WMSC dealt with Formula One through two representatives of the F1 Commission. One of them would be the representative of the Commerical Rights Holder (i.e. Bernie Ecclestone) with full voting rights and a Delegate, “who has competed in the FIA F1 Championship as a competitor for the greatest number of seasons since 13 May, 1950”. One can only wonder who this last one could be, such a mystery. In all fairness, if Ferrari couldn’t make it to a WMSC meeting, then the “most successful competitor over the previous ten years” could jump in.

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Just to make it clear: the F1 Commission was either headed by the commercial rights holder or the head of the regulatory body (Bernie or Max), which is eyebrow-raising by itself, but then the teams were split into two parties and one of them included Ferrari, with Ferrari’s main sponsor also sitting at the table. Then - when taking matters to an even higher level - the Commission was represented by Ecclestone and Ferrari in the WMSC, both of them with full voting rights in all of motorsports around the world. Now you may have a clue why Ferrari is getting some extra cash in F1 - even today - from Bernie for simply being Ferrari.

The inner governance of F1 is at a very different place now, though, as Bernie settled with each of the teams individually as opposed to unitng them under one contract, causing quite a bit of chaos having all the matters battled out on the same field as per individual interests.

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This leads us to our next point, the F1 Technical Working Group. In 1994 and 1997 the TWG was a subsidiary to the F1 Commission and all of their decisions in technical matters of F1 cars remained within their own jurisdiction (the same went to the decisions made by the F1 Commission as well as the WMSC did not interfere with the Commission - except in extreme circumstances as you will see later).

A hint of how difficult it was to get anything technical through even in the ‘90s.

The TWG consisted of seven members: a representative from each of the three Manufacturer and FOCA teams and a Technical delegate from the FIA. They were the ones with voting rights over technical regulations. One of the most interesting clauses in this respect states that the performance of the cars were ought to be kept “within reasonable limits taking safety into consideration” and that if “the average performance of the leading ten cars [...] show an unacceptable increase over the previous season [...] the FIA shall give notice to the F1 Technical Working Group to propose measures to reduce the performance of the cars”. In other words, if there was a measurable jump in speed from one season to the other, the FIA could intervene and note the TWG to slow the cars down, which happened on numerous occasions during the last ten years or so.

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However, that wasn’t easy to push through. Once the FIA noted the TWG, they had two months to come up with an alternative. If they failed to to do so, the FIA presented three different alternatives that the F1 Commission had to decide on within 45 days. If they failed at this task, too, then the World Motorsport Council came in and forced through their favoured option - the only time the WMSC could directly interfere with F1 matters. Their primary focus was reducing the “performance of the cars”, causing the “least prejudice to the competitors” and to “make changes to the aerodynamics in priority” - see cars going from 1997 to 1998 or 2008 to 2009 as references.

To cite some anachronism, Red Bull has been very much vocal about technical regulations in the past years. Had a certain section of the 1997 Agreement has been applicable to their current case, they couldn’t have used their power together with Toro Rosso to double-vote on any matter (unless they were proven to be of completely different entities). Their combined effort would have counted as a single vote under the Concorde Agreements.

It is apparent that although the Concorde Agreements made the F1 decision-makers a tight, cartel-like community, it was a working one on the most important matters. As the current state of affairs go, the self-interest of the teams can (and they usually do) block each and every decision thrown on the table with their own interests in force, empowered by their individual agreements. The 1992 or 1997 layouts weren’t perfect either (as you will see it below), but it was certainly a much more functional powerplay than it is now.

In the following few paragraphs we get into the parts of the 1997 Agreement that is slightly closer to the sporting side of F1, which are interesting in respect to some of the decisions made at F1 weekends of the past and present.

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Right off the bat, ta so-called Permanent Bureau was set up to respond to urgent matters at each event, consisting of at least three members in rotation. Namely the President of the FIA, the Representative (Ecclestone), the F1 Commission Delegate (Ferrari) and the most successful FOCA team (Williams or McLaren, usually). Whatever changes were made to the F1 Commission or the Permanent Bureau in the 1998 Concorde Agreement, said body seemed to fail spectacularly during the 2005 United States Grand Prix with Mosley’s absence and Ferrari’s reluctant proposition of having the advantage of Bridgestone tyres and not care about the rest of the matters.

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One of the keywords that is frequently thrown around motorsports regulations is ‘safety’, sometimes only to argue for or against any changes that may or might not have anything to do with safety itself. That is not an accident either. Decisions made on ‘passive safety’ measures have been a shortcut to make changes to regulations directly and instantly. In this Agreement, changes on safety basis are exclusive to the design of the car, of which the Technical Working Group is the only judge.

Were you offended by the advantage made by a design-element on another team’s car and you didn’t have the time or the finances to copy it? You only needed to cite ‘passive safety’ in the Technical Working Group to see if your bluff was working out, forcing out a return to a more conventional design.

There are other bits and bobs in the Agreement that may shed a little light on some past and present decisions in F1. For example, only constructors could enter cars and each of them could enter two of them or more - given that this happened in accordance with the FIA’s approval (no points for third car or its driver). If an entrant failed to turn up at an event, it was liable to make a payment to the Promoters (see Arrows, Caterham and Manor from the past), $2,500,000 tops per season and potentially as much as $500,000 per car per event - that could be further raised upon further instances of breach.

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The 1997 Agreement specifically states that at least 16 cars were ought to have made it to the Championship. If they failed to do so, the grid could have been filled up with Formula 3000 cars with superlicenced drivers. This idea greatly resembles the proposition put forward in early 2015 with the rapid demise of two teams in succession, so that aptly-called ‘Super GP2’ cars could have potentially filled up the grid if it came to that.

However, it has to be noted that Formula One does not like competition. So much so, that the 1997 Agreement specifically states that “no race for open wheels - single seat cars equipped with engines with a capacity in excess of 2,000 cubic centimetres normally aspirated or 1,000 cubic centimetres supercharged (including Formula One cars) other than the Event [i.e. the Grand Prix itself] or a race in the Formula 3000 Championship will take place on the … Circuit whether promoted by the Promoters or otherwise without the prior written consent of the Permanent Bureau of the F1 Commission whose consent shall not be reasonably withheld.” This is exactly why F1, GP2 and GP3 are under the same ownership.

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One current question circulated within the racing community is about the making of the calendar, which - even in 1994 and 1997 - was the right of the Commercial Rights Holder to propose. In plain terms, had he had the same rights in 2016 as in 1997, Bernie Ecclestone may have decided - virtually in person - to schedule the European Grand Prix in Azerbaijan at the very same weekend and time slot as the Le Mans 24, putting an end to any attempts by F1 drivers trying to have a go in one of the world’s greatest race.

On the matter of sponsorship, the Agreement concludes that “the promotional or advertising material displayed on the cars, drivers and competitors [...] shall not be limited or made compulsory”. After all, it was not up to any parties to sanction advertisements, other than the hosting country’s laws. Given how painstaking details can sponsors get down to, the lack of their representation must have hurt a lot at the 2001 Italian Grand Prix.

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1992 was a huge leap in extending the existing TV rights of which FOCA had a great influence on. You can easily spot this, e.g. the first officially licenced F1 video games came out in 1992 - licenced directly by FOCA, a right that was virtually restricted to TV before and Ecclestone’s company (FOPA, later Formula One Management) had the sole right to transmit images from the track during a race weekend.

[F1 Super Lap by SEGA - the first ever, officially licenced F1 video game]

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Below, you can see how the Prize Fund was distributed between the competitors from 1997:

How this actually is disrtibuted in the present day was well-drawn up by Joe Saward.

And what are some of the current figures? This is what Formula Money concluded.

And who signed all of these? Well, of course everybody:

Whatever is governing Formula One currently as a business venture, it is clear that the financial stakes went over the roof. A great deal of Bernie Ecclestone’s shares of Formula One Management - through a complicated set of transactions - wound up in the ownership of CVC Captial Partners - and now Liberty Media, turning it into the largest shareholder. The commercial rights were leased to a certain Formula One World Championship Ltd. for 100 years, beginning in 2011. Said rights, that were owned by the FIA until 1996, were passed on to Bernie’s company, who then leased it further until 2111. The current agreements have been - reportedly and in essence - made between the shareholders, the individual teams and the head of the FIA - all thrown into the same pool, making a worst-case scenario where all the conflicts of interests are fought on the same battlefield. This has resulted in the phenomenon of winning an argument by bringing the biggest gun (i.e. cash) to the table - in case one wonders why Ferrari, Mercedes or even Red Bull have all the wild cards at hand when it comes to have a go at the regulations, for instance.

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Essentially, the current contracts undo everything the Concordes achieved (especially the 1997 one), leaving the teams on their own to fight for their interests while bringing the money people to the same table along with one single guy who - under normal circumstances - should be in charge of it all and is greatly outnumbered by the cashiers and the players.

What is Bernie Ecclestone getting from all this? Loads and loads of cash in exchange for a great deal of his control over the sport.

The Concorde Agreements united the teams - headed by someone who was able to take their rights and put it at work to make it a multi-billion dollar business, working with the FIA in tandem. At the peak of the business side of things, Formula One - as a sport - was virtually in the hands of one man. When Formula One turned into a global phenomenon, the commercial rights were passed over to corporations and the governing power was - in practice - given back to the teams, almost completely cutting out the organisation that should ‘own’ it in the first place.

Moral of the story? Not much, except that if you are running one of the most widely watched, live, multi-billion dollar sports/entertainment programmes in television history, you might want to have perspective about where you want to take it, what is to be done about it and how you can have and keep it your own way - and still, you might just lose grip of it at one point.