The FIA has confirmed that Red Bull breached the Formula 1 Financial Regulations during the 2021 season.
The sport’s governing body today released details of the Certificates of Compliance process it has been conducting with all teams over their financial results for last season.
Financial Regulations were introduced to Formula 1 last year for the first time in the sport’s history, with teams limited to $145 million (with some exemptions and concessions).
Speculation has swirled since the Singapore Grand Prix at the start of the month that Red Bull had overspent on that figure, an accusation team boss Christian Horner angrily refuted.
It was claimed at the time that Red Bull had breached the budget cap and Aston Martin a procedural breach.
Both of those accusations have now been confirmed as true.
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According to a statement issued by the FIA, Red Bull “is considered to be in Procedural and Minor Overspend Breaches of the Financial Regulations.”
Aston Martin meanwhile is “considered to be in Procedural Breach of the Financial Regulations” (full statement below).
The Certificate of Compliance process is highly complicated and, in many regards, a matter of interpretation and negotiation between teams and the FIA.
As part of the process, company structure is forensically examined, with the fair market value attributed to all components to processes, in order to ensure teams that produce their own parts versus buying them from rivals (where allowed) are treated equitably.
That process began in March with the financial results of all teams submitted to the FIA, with its outcome finally revealed after a number of delays.
The outcome of the Certification process is critical as it is the first time the Financial Regulations have been tested.
Max Verstappen won last year’s world drivers’ championship at the wheel of a Red Bull, narrowly edging Lewis Hamilton in a controversial climax in Abu Dhabi.
With the Dutchman’s team having been found to have overspent during that championship campaign, serious questions must now be answered.
Exactly what punishment the Milton Keynes squad will receive for the breach is unknown, with a defined governance process in place to manage the outcome from here.
That involves a settlement agreement that now needs to be reached between Red Bull and the FIA, which Mercedes boss Toto Wolff explained entailed accepting responsibility, acceptance of any fines, and the publication of the outcome.
Should the team be unable to reach a settlement agreement, or doesn’t want to, the matter is sent to the Cost Cap Adjudication Panel.
There, a group of independent judges will consider the matter before deciding whether the team should be penalised or not.
If that doesn’t resolve the situation satisfactorily it can then be referred to the International Court of Appeal.
The precise detail of the Red Bull breach is not known, though rumours have swirled within the Formula 1 paddock with educated sources suggesting it had no meaningful performance gain and was a matter of a difference of interpretation between the operation and the FIA over the classification of some tasks.
Two schools of thought exist on how the break should be treated, with the most popular in the paddock being that the FIA comes down hard on those who have transgressed.
The reason for that is the Financial Regulations need to be underpinned with severe penalties to dissuade the temptation for teams to gamble on breaching them deliberately.
As the Financial Regulations were new for 2021, the process has never been tested and therefore, unlike in Sporting or Technical matters, there are no precedents when it comes to penalties.
That is also a very deliberate point, as by failing to specify an exact penalty for different types of breaches (procedural, minor, major) teams are dissuaded to flirt with the rules for fear of an unknown outcome.
Red Bull is now set to offer something of a test case to the integrity of the Financial Regulations, with its rivals watching on with keen interest.
It should be noted that Formula 1 prize money is paid out against the constructors’ championship outcome, which was last year won by Mercedes.
As a result, there is, theoretically, no direct gain as a result of the breach in terms of income to the team from the commercial rights holder.
However, it is accepted that the drivers’ championship offers significant marketing opportunities which can be used, with that title held in far higher regard by spectators.
There is also the potential for there to be any gains or benefits that have carried over into 2022 as a result of the breach last year.
These are complicated questions that have to be answered quickly as the cost cap has quickly become fundamental to the viability of several teams.
Should it not be dealt with appropriately, the Financial Regulations themselves will be compromised, a point which has ruinous potential for the sport.
With regard to the Procedural Breach committed by Aston Martin, a fine is the most likely outcome.
A precedent in that regard has been set by Williams when it was late in submitting aspects of its financials in March – a point noted by the FIA in today’s statement.
Interest, therefore, centres on what penalty will be levied on Red Bull, details of which have not been published, or likely even decided at this point.
FIA Statement in Full:
The FIA confirms that its Cost Cap Administration has now completed the review of the Reporting Documentation submitted by each Competitor that participated in the 2021 FIA Formula One World Championship in respect of the 2021 Reporting Period ending on 31 December 2021,” the FIA announced on Monday evening.
The FIA Cost Cap Administration has issued certificates of compliance to seven of the ten Competitors:
- Aston Martin Aramco Cognizant Formula One Team is considered to be in Procedural Breach of the Financial Regulations;
- Oracle Red Bull Racing is considered to be in Procedural and Minor Overspend Breaches of the Financial Regulations; and
- Williams Racing has complied with the Financial Regulations in respect of the 2021 Reporting Period with the exception of a previous Procedural Breach (in regard to which the Cost Cap Administration entered into an ABA with Williams in May 2022. This Procedural Breach was then remediated by Williams in a timely, cooperative and transparent manner).
The review of the Reporting Documentation submitted has been an intensive and thorough process, and all Competitors gave their full support in providing the required information to assess their financial situation during this first year of the Financial Regulations. The FIA Cost Cap Administration notes that all Competitors acted at all times in a spirit of good faith and cooperation throughout the process.
The FIA would also note that with respect to this first year of the application of the Financial Regulations the intervention of the FIA Cost Cap Administration has been limited to reviewing the submissions made by the Competitors and that no full formal investigations were launched.
The FIA Cost Cap Administration is currently determining the appropriate course of action to be taken under the Financial Regulations with respect to Aston Martin and Red Bull and further information will be communicated in compliance with the Regulations.
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