top of page

The Legal Racetrack: An Analysis of the Contracts of Motorsport

Written by Olivia Hicks, Edited by Tarun Suresh

Oscar Piastri in his McLaren at Formula 1 testing in Bahrain. Credit - Dan Istitene - Formula 1/Formula 1 via Getty Images.

Who wins amid extension and termination rumours: Drivers, teams, or fans?


This time last year, McLaren’s now rookie, then Alpine junior driver, Oscar Piastri, set the Formula 1 community ablaze with a single tweet. The tweet read, “I understand that, without my agreement, Alpine F1 have put out a press release late this afternoon that I am driving for them next year. This is wrong and I have not signed a contract with Alpine for 2023.”


Piastri cut down any rumours circulating, by concluding, “I will not be driving for Alpine next year.”


Contracts have long been a staple of “silly season,” beginning at the summer break in late July, when whispers about next year’s driver lineups commence. Speculation about extensions, breaches, and terminations keeps fans engaged, and F1 in the headlines during the three weeks without racing.


At the end of the 2023 season, seven drivers’ contracts are due to expire, including those of Lewis Hamilton, Zhou Guanyu, Daniel Ricciardo, Yuki Tsunoda, Alex Albon, Logan Sargeant, and Kevin Magnussen.


However, even drivers whose contracts aren’t up for debate have fuelled rumours around the paddock. Rumours have surfaced that Ferrari have offered Charles Leclerc a record-breaking £185 million multi-year contract; however, neither Ferrari nor Leclerc have confirmed reports. The extension rumours follow intense scrutiny of Ferrari’s internal operations and speculations, that Leclerc may be searching elsewhere for his championship aspirations.


The gossip-inducing contract season can be as mundane as a driver staying exactly where he is, or as thrilling as a court case. The excitement is only amplified by these documents never reaching the public.


But, as costs rack up in contract disputes, and settlements are often controversial and heavily debated in public forums, there seem to be few winners walking away from the carnage.

Michael Schumacher driving for Jordan at the 1991 Belgian Grand Prix. Credit - Paul-Henri Cahier/Getty Images.

How Contracts Work

As binding legal documents between a driver and a team, contracts serve as an agreement that both involved will commit to their obligations. For a constructor, this typically includes clauses specifying car performance, regulation compliance, brand sponsorships, and, most important, compensation. A driver’s responsibilities lie in following team orders, in addition to meeting specific thresholds for success.

When a contract has been breached, it is either dealt with internally, as with Red Bull’s Max Verstappen potentially violating his contract in 2022, after refusing to follow team orders at the Brazilian Grand Prix, or through the Fédération Internationale de l’Automobile Contract Recognition Board, a four-person court brought in to determine contract legality issues in mere days. The legal body was founded, following Michael Schumacher’s contract debate in 1991, where the difference between one word — “a contract" rather than “the contract" — allowed the seven-time World Champion to slip out of his commitment with Jordan.


Several factors come into play when deciding if a contract is to be extended or cut short, with performance trumping most considerations. However, a team may hold onto drivers, based on sponsorship deals or marketability.


While Sergio “Checo” Perez’s spot at Red Bull is a hot commodity, and widely suspected to house a different driver after the 2024 season, the Mexican driver brings a massive draw in the form of fans and sponsors in his home country. According to the Associated Press, the Mexico City Grand Prix hit a record-high attendance, with nearly 400,000 spectators watching from the stands last year

.

Rumours have circulated about Audi’s 2026 F1 debut, including the potential signing of Chinese driver Zhou aiding the manufacturer’s entry into the Chinese luxury auto market.

Contract disputes can also stem from geopolitical shakeups. Ahead of the 2022 season, Haas axed Nikita Mazepin’s contract, following Russia's invasion of Ukraine.


Whether acted upon because of finishing positions, political conflicts or drivers’ crash rates, exit clauses are designed to protect both the driver and the team. Drivers can also buy their way out of contracts, and similarly, teams can pay drivers to leave the seat open for a newbie or circling rival teams can poach a driver with a fee to his previous employer.


In 2022, Ricciardo had yet to complete his multi-year McLaren commitment. With a year left until his contract lapsed, McLaren paid the Australian an estimated $15 million to part ways, according to the Associated Press.


For Piastri, the Twitter-fuelled legal nightmare that ensued after his switch from Alpine to McLaren buckled under the eyes of the law. Alpine’s lawsuit against Piastri claimed the Renault-backed team invested a significant sum under the alleged agreement that Piastri would take the open seat in 2023. The suit backfired after the Contract Recognition Board unanimously supported Piastri, which left the French team with a sum of £540,000 in legal fees.


Half a million in legal fees likely hardly impacted the French team, as according to Forbes, Alpine are estimated to bring in an annual revenue of $325 million in 2023.


The Board’s decision mirrored its 2007 ruling in favour of Timo Glock, and his newly signed contract with Toyota, despite already being contracted with BMW Sauber.

Nyck de Vries, the latest driver to be axed from the Red Bull system. Credit - Rudy Carezzevoli/Getty Images.

How Red Bull Gets Away With Cutting Drivers Loose

The notoriously cut-throat top team has demoted four drivers since 2016. With a high turnover rate, and a small tolerance for mistakes, Red Bull has paid close attention to its drivers’ exit clauses, and pulled the plug when performance doesn’t meet the team standards.

Two-time World Champion Verstappen replaced Daniil Kvyat in 2016, after just four races. Pierre Gasly dropped back down to then Toro Rosso, now Alpha Tauri, after a measly 12 races during the 2019 season. Albon held out for over a year, before Red Bull snagged his seat at the end of 2020.

Nyck de Vries is the newest driver to fall short of expectations under Red Bull’s gaze. The former Formula E World Champion’s contract was terminated before he could complete half a season with Red Bull’s junior team, AlphaTauri.

While the details of contracts are kept tightly sealed, it’s not difficult to determine whether Red Bull has firm performance benchmarks outlined for drivers. Unfortunately, for those who can’t meet them, contesting a contract in court or in the eyes of the FIA doesn’t seem to hold much ground.

Alex Palou and Arrow McLaren haven't had the best of relationships, lately. Credit - Justin Casterline/Getty Images.

It Isn’t Just an F1 Issue

Last year, Chip Ganassi Racing took Alex Palou to court over rumours of the IndyCar driver having signed a contract with Arrow McLaren. The civil lawsuit was dropped in September 2022, when both parties decided the Spanish driver would continue his run with the team for the 2023 IndyCar season.


History has a habit of repeating itself. Just a year later, Palou is burning similar bridges. The Chip Ganassi Racing driver, who leads the championship with a healthy 101-point advantage, was said to have signed a pre-contract deal with Arrow McLaren starting in 2024. The negotiation battle with McLaren from 2022 seemed to finally settle with the news. However, Palou and Chip Ganassi Racing took to social media on Saturday, to stamp out any rumours.

“I grew up respecting the McLaren Team and their success. The new management does not get my same respect,” Chip Ganassi Racing said via Instagram. “Alex Palou has been a part of our team and under contract since the 2021 season. It is the interference of that contract from McLaren which began this process, and ironically, they are now playing the victim. Simply stated, the position of McLaren INDYCAR regarding our driver is inaccurate and wrong; he remains under contract with CGR.”

Palau finds himself in court yet again. The Indianapolis Star reported on Friday that Arrow McLaren filed a lawsuit against both Palou and Chip Ganassi Racing in a U.K. Commercial Court.

Unlike F1, IndyCar doesn’t have a specified body to oversee contract infringement. The Automobile Competition Committee is the sporting authority for American racing series, including IndyCar. However, the organisation acts primarily as a licensing authority.

While the FIA has its own court system and International Court of Appeal, IndyCar contract disputes, like in the case of Palou, are decided in state civil court. IndyCar could benefit from a contracts council, but its decision to settle out of the purview of the racing series through a third party has its perks.

The long-held joke that the FIA acronym stands for Ferrari International Assistance begs the question of the ruling body’s bias in making legal decisions. In 2020, teams publicly blasted the FIA for conducting and settling an investigation with Ferrari, over power unit regulations behind closed doors, albeit legal.

“An international sporting regulator has the responsibility to act with the highest standards of governance, integrity and transparency,” the statement read. “We strongly object to the FIA reaching a confidential agreement with Ferrari to conclude this matter.” Under the FIA umbrella, the pseudo-court of contracts is a part of that organisation. While the Contract Recognition Board has efficiently settled internal disputes, the Alpine and McLaren tug-of-war over Piastri marked only its third case. The small pool of examples provides little proof of whether the board is effective or not.

As the silly season sets in, there is bound to be contract drama. The question still remains, whether contract lawsuits — despite far and few between — will continue to be settled in-house, or if F1 will seek outside court expertise.



Comments


bottom of page