SportF1Full FIA ruling on Red Bull F1 over spending...

Full FIA ruling on Red Bull F1 over spending limit

An Accepted Default Agreement ( ABA ) dated October 26, 2022 has been accepted by the Cost Management Panel and Red Bull Racing (RBR) in accordance with Article 6.28 of the Formula Financial Regulations 1 of the FIA.

The Cost Cap Administration admits that Red Bull has acted cooperatively throughout the process and has tried to provide additional information and evidence when requested. Bearing in mind that this is the first year of application of the Financial Regulation, that it is a very complex set of rules that teams had to adapt to and that there is no evidence that Red Bull has ever sought to act in bad faith, dishonestly or fraudulently.

The Cost Limit Administration considered it appropriate, in these circumstances, to offer Red Bull an ABA to resolve everything that happened as set out below, given that the expense violation is better than the 5% established by regulation, and the show of willingness of the team to accept the infractions and cooperate with the Cost Limit Administration.

Summary of the ABA (accepted default agreement) between Red Bull and the FIA:

  • The relevant costs presented by Red Bull and reported in its documentation for the entire 2021 season are £114,293,000 (132,969,255 euros).
  • Following investigation by the Cost Cap Administration, an infringement by Red Bull under Article 8.2(e) of the Financial Regulations was found due to the filing of an incorrect annual report in respect of the annual report period ending on past December 31, 2021, since it incorrectly excluded and/or adjusted costs for a total of £5,607,000 (about 6.5M euros).
  • A misdemeanor infringement by Red Bull under Article 8.10(b) of the Financial Regulations relating to the relevant costs is confirmed. In short, the Austrian team’s spending in 2021 was £118,036,000, i.e. it was exceeded by less than 5%, on a total of £1,864,000 (2.1 million euros), 1.6% more than allowed.

Summary of terms and sanctions of the ABA between Red Bull and the FIA:

According to the Cost Cap Administration investigation, Red Bull has acknowledged that the reports submitted by themselves included the following errors:

  1. Expenses excluded overestimated according to Article 3.1 (a) of the Financial Regulations (in relation to catering services).
  2. Expenses according to Article 3.1(w) of the Financial Regulations (consideration and contributions to the social security of the employees).
  3. Expenses according to Article 3.1(h)(i) of the Financial Regulations (relating to Activities outside of F1), as those costs had already been offset within the total costs report.
  4. Expenses according to Article 3.1(k) of the Financial Regulations (regarding the bonus and contributions to the social security of employees).
  5. Underestimation of relevant expenses with respect to a gain on the disposal of fixed assets by not making the upward adjustment that was necessary.
  6. Costs in accordance with Article 3.1(q) of the Financial Regulations (in respect of apprenticeship fees);
  7. Expenses according to Article 3.1 (h) (ii) (i) of the Financial Regulations (employees’ social security contributions);
  8. Underestimation of relevant expenses with respect to the provisions established in Article 4.1(a)(i) of the Financial Regulation (costs of use of power units).
  9. Expenses according to Article 3.1 (h) (i) of the Financial Regulations ((consideration and contributions to the social security of the employees).
  10. Underestimation of relevant expenses with respect to Article 4.1(f)(i)(B) of the Financial Regulations (use of inventories);
  11. Administrative error regarding the RBR calculation of certain costs charged by Red Bull PowerTrains Limited.
  12. Certain travel expenses in accordance with Article 3.1(r) of the Financial Regulations.
  13. Maintenance expenses according to Article 3.1(i) of the Financial Regulations.

Consequently, its relevant expenses in the 2021 report exceeded the cost limit of £1,864,000 (€2.1 million), 1.6% more than allowed. Therefore, RBR has accepted that it has breached: (i) Article 8.2 (e) of the Financial Regulations with respect to the 2021 Annual Report Period, and (ii) Article 8.10 (b) of the Financial Regulations with respect to that did not stay below the 2021 Cost Cap.

The FIA acknowledges that had RBR applied the correct treatment within its Full Year Reporting Documentation of RBR’s Notional Tax Credit within its 2021 submission of a value of £1,431,348, the Cost Cap Administration would have considered it to have met the Article 4.1(b) of the Regulations and therefore the relevant RBR costs for the 2021 reporting period would have in fact exceeded the 2021 cost cap by £432,652 (0.37%).

On that basis, RBR has accepted the imposition of the following sanctions:

  • RBR must pay a Financial Penalty of USD 7,000,000 to the FIA within 30 days from the date of execution of the ABA (Article 9.5 of the Financial Regulations);
  • RBR receives a Minor Sporting Penalty in the form of limiting RBR’s ability to perform Aerodynamic Tests for a period of 12 months from the date of execution of the ABA by applying a 10% reduction to the Coefficient C used to calculate the Individual Restricted Wind Tunnel Testing (RWTT) and Restricted Computational Fluid Dynamics (RCFD) limits applicable to each Team as set out in Article 6 of Appendix 7 of the FIA Formula 1 Sporting Regulations. For example, if the Coefficient C, based on RBR championship position is 70%, the new effective value of C will be: CNEW=70% x (1-0.10) = 63.0%;
  • RBR bears the costs incurred by the Cost Cap Administration in connection with the preparation of the ABA.

The Cost Cap Administration’s decision to enter the ABA constitutes its final decision resolving this matter and is not subject to appeal. Failure by RBR to comply with any of the terms of the ABA will result in a new Procedural Violation under Articles 6.30 and 8.2(f) of the Financial Regulations and automatic referral to the Cost Cap Adjudication Panel.

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