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Red Bull fined $7-million for 2021 F1 Cost Cap breach

cost cap breach budget cap penalties guilty f1 gavel mallet red bull fia rules broken cheat

The penalties by the FIA announced Friday at the Mexico City Grand Prix are unlikely to satisfy Red Bull rivals, many of whom called for harsh penalties.

Comments from fans and pundits alike, ranged from stripping Max Verstappen of last year’s F1 world title, a reduction in future Red Bull spending, and any punishment that would hurt the team competitively.

After a week of waiting and delays fueling the flames of controversy, the FIA and Red Bull came to terms on a monetary fine and a reduction of only 10% of its allotted time in the wind tunnel in 2023. Red Bull has 30 days to pay the $7 million fine and a year to spread out its reduction of wind tunnel time.

Red Bull must also pay the costs incurred in the investigation.

Red Bull accepted guilt in the FIA penalty notice, but the governing body noted “there is no accusation or evidence that RBR has sought at any time to act in bad faith, dishonestly or in a fraudulent manner, nor has it wilfully concealed any information from the F1 Cost Cap Administration.”

Red Bull, though, explained it as a clerical error and misinterpretation of how to apply the costs in certain areas, among them: catering services, social security contributions, travel costs and how they handled unused parts.

Red Bull has already wrapped up both a second F1 title with Verstappen and the constructors’ championship with three races remaining this season.

Are Red Bull’s F1 rivals sore losers?

SUZUKA, JAPAN - OCTOBER 06: Max Verstappen of the Netherlands and Oracle Red Bull Racing walks in the Paddock next a fan holding a pit board showing their support during previews ahead of the F1 Grand Prix of Japan at Suzuka International Racing Course on October 06, 2022 in Suzuka, Japan. (Photo by Clive Mason/Getty Images)

“They are sore anyway, so it doesn’t matter what you do,” Verstappen said of those who called for his championship to be stripped.

The F1 cost cap was put in place as a competition equalizer to prevent the larger, heavily-funded teams from outspending the smaller organizations struggling to keep up.

Rival team Mercedes has argued that a monetary penalty will only encourage others to also overspend and pay the fine as punishment. McLaren chief executive Zak Brown even wrote a letter to the FIA demanding stiff punishment for an offense he likened to cheating.

Brown said any team found guilty of overspending should be penalized that same amount and face an equal reduction the next season, and violating teams should suffer in competitive areas.

“The bottom line,” Brown wrote, “is any team who has overspent has gained an unfair advantage both in the current and following year’s car development.”

Brown’s letter incensed Red Bull principal Christian Horner, who has maintained the spending violation was minor but had erupted into scandal.

“Suddenly we are tried and subjected to three weeks of effective abuse. And then to be seeing a letter accusing us of cheating and being fraudulent, it is just not right, and this has to stop,” Horner said last week. “It is tremendously disappointing for a fellow competitor to be accusing you of cheating, to accuse you of fraudulent activity is shocking.”

As to those who have called for Verstappen’s 2021 title to be stripped, he said there are many who will never accept his first championship. Verstappen beat Lewis Hamilton in a controversial finish created when the since-fired race director made a late race change in protocol during the season finale that allowed Verstappen to pass Hamilton for the win and the championship.

“From my side I can (accept it), probably they can’t and will never be able to and that’s a problem for them to deal with,” Verstappen said.\

The FIA Statement on Red Bull F1 Cost Cap breach

FIA investigation results into 2021 Abu Dhabi GP on March 18

Download it here. Following the submission of all required documentation by all ten Formula One Teams, the F1 Cost Cap Administration carried out the first ever Review process under the FIA Formula One World Championship Financial Regulations. These new Financial Regulations are a very complex set of rules that competitors were required to adapt to for the first time.

Red Bull Racing was found to be in breach, however, the F1 Cost Cap Administration recognised that Red Bull Racing has acted cooperatively throughout the review process and has sought to provide additional information and evidence when requested in a timely manner, that this is the first year of the full application of the Financial Regulations and that there is no accusation or evidence that RBR has sought at any time to act in bad faith, dishonestly or in fraudulent manner, nor has it wilfully concealed any information from the F1 Cost Cap Administration.

In these circumstances, the F1 Cost Cap Administration offered to RBR an ABA to resolve this matter. That offer was accepted by RBR.

An Accepted Breach Agreement (“ABA”) dated 26 October 2022 was therefore entered into by and between the Cost Cap Administration and Red Bull Racing pursuant to Article 6.28 of the FIA Formula 1 Financial Regulations (“Financial Regulations”). A link to a summary of the terms of the ABA as provided for by Article 6.32 of the Financial Regulations is below.

Accepted Breach Agreement details

The FIA detailed the terms of the ABA in a document they shared, below is the transcript:

An Accepted Breach Agreement (“ABA”) dated 26 October 2022 has been entered into by the Cost Cap Administration and Red Bull Racing F1 Team (“RBR”) pursuant to Article 6.28 of the FIA Formula 1 Financial Regulations (“Financial Regulations”). The Financial Regulations are issued by the FIA and form part of the terms and conditions of participation in the FIA Formula One World Championship.

The Cost Cap Administration recognised that RBR has acted cooperatively throughout the review process and has sought to provide additional information and evidence when requested in a timely manner, that this is the first year of the full application of the Financial Regulations which are a very complex set of rules that competitors were required to adapt to and that there is no accusation or evidence that RBR has sought at any time to act in bad faith, dishonestly or in a fraudulent manner, nor has it wilfully concealed any information from the Cost Cap Administration.

The Cost Cap Administration considered it appropriate, in these circumstances, to offer to RBR an ABA to resolve  this matter on the terms set out below, given the limited nature of the Procedural Breach in issue and the fact that the Minor Overspend Breach falls at the lower end of the <5% minor overspend range, and RBR’s willingness to accept the breaches and to cooperate with the Cost Cap Administration. That offer was accepted by RBR.

The ABA concerns:

• RBR’s submitted Relevant Costs reported in its 2021 Full Year Reporting Documentation of
£114,293,000;

• Subsequent to the findings of the Cost Cap Administration, a Procedural Breach committed by RBR pursuant to Article 8.2(e) of the Financial Regulations due to the submission of inaccurate Full Year Reporting Documentation in respect of the Full Year Reporting Period ending on 31 December 2021 because it inaccurately excluded and/or adjusted costs amounting to a total of £5,607,000 in its 2021 Full Year Reporting Documentation; and

• Consequently, a Minor Overspend Breach committed by RBR under Article 8.10(b) of the Financial Regulations because its Relevant Costs, as adjusted by the FIA, exceeded the 2021 Cost Cap of £118,036,000 by less than 5%, namely by £1,864,000 (i.e., 1.6%).

Summary of ABA terms and sanctions

In accordance with the findings of the Cost Cap Administration, RBR has acknowledged that the Reporting Documentation submitted by it included the following incorrectly excluded and/or adjusted costs:

1. Overstated excluded costs pursuant to Article 3.1(a) of the Financial Regulations (concerning catering services);

2. Costs pursuant to Article 3.1(w) of the Financial Regulations (concerning consideration and associated employer’s social security contributions);

3. Costs pursuant to Article 3.1(h)(i) of the Financial Regulations (in respect of Non-F1 Activities), as those costs had already been offset within Total Costs of the Reporting Group;

4. Costs pursuant to Article 3.1(k) of the Financial Regulations (in respect of bonus and associated employer’s social security contributions);

5. Understatement of Relevant Costs in respect of a gain on disposal of fixed assets by failing to make the necessary upwards adjustment;

6. Costs pursuant to Article 3.1(q) of the Financial Regulations (concerning apprenticeship levies);

7. Costs pursuant to Article 3.1(h)(ii)(i) of the Financial Regulations (concerning consideration and
associated employer’s social security contributions);

8. Understatement of Relevant Costs in respect of provisions set forth by Article 4.1(a)(i) of the Financial Regulations (concerning the cost of use of Power Units);

9. Costs pursuant to Article 3.1(h) (i) of the Financial Regulations (concerning consideration and associated employer’s social security contributions);

10. Understatement of Relevant Costs in respect of provisions set forth by Article 4.1(f)(i)(B) of the Financial Regulations (concerning use of inventories);

11. Clerical error in respect of RBR’s calculation of certain costs re-charged to it by Red Bull Power Trains
Limited;

12. Certain travel costs pursuant to Article 3.1(r) of the Financial Regulations;

13. Costs of maintenance pursuant to Article 3.1(i) of the Financial Regulations.

And further that consequently its Relevant Costs for the 2021 Reporting Period exceeded the 2021 Cost Cap by £1,864,000 (1.6%). RBR has therefore accepted that it has breached: (i) Article 8.2(e) of the Financial Regulations due to its failure to file accurate Full Year Reporting Documentation in respect of the 2021 Full Year Reporting Period, and (ii) Article 8.10(b) of the Financial Regulations due to its failure to keep its Relevant Costs under 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, it would have been considered by the Cost Cap Administration to be in compliance with Article 4.1(b) of the Regulations and therefore RBR’s Relevant 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:

a) RBR must pay a Financial Penalty of USD 7,000,000 to the FIA within 30 days of the date of execution of the ABA (Article 9.5 of the Financial Regulations);

b) RBR receives a Minor Sporting Penalty in the form of a limitation of RBR’s ability to conduct aerodynamic Testing during a period of 12 months from the date of execution of the ABA through the application of a reduction of 10% of 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 to the
FIA Formula 1 Sporting Regulations. For example, if the Coefficient C, based on RBR’s championship position is 70%, the effective new value of C will be: CNEW=70% x (1-0.10) = 63.0%; and

c) RBR bears the costs incurred by the Cost Cap Administration in connection with the
preparation of the ABA.

The decision of the Cost Cap Administration to enter into the ABA constitutes its final decision resolving
this matter and is not subject to appeal. Non-compliance by RBR with any terms of the ABA will result in
a further Procedural Breach under Articles 6.30 and 8.2(f) of the Financial Regulations and automatic
referral to the F1 Cost Cap Adjudication Panel.

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