Concorde Agreement

The Concorde Agreement is a contract between the Fédération Internationale de l'Automobile (FIA), the Formula One teams and the Formula One Group which dictates the terms by which the teams compete in races and how the television revenues and prize money is divided. There have in fact been seven separate Concorde Agreements, all of whose terms were kept strictly secret: The first in 1981, others in 1987, 1992, 1997, 1998, 2009 and the current agreement in 2013. However, the secrecy was broken by noted racing journalist Forrest Bond when the 120+ page 1997 Concorde Agreement was published at the end of 2005 by RaceFax.^[1]

The effect of the agreements is to encourage professionalism and to increase the commercial success of Formula One. The most important factor in achieving this was the obligation of the teams to participate in every race, hence making the sport more reliable for broadcasters who were expected to invest heavily to acquire television broadcast rights. In return the teams were guaranteed a percentage of the sport's commercial revenue.

First Concorde Agreement (1981)

In 1979, the Commission Sportive Internationale, an organization subordinate to the FIA which was at that time the rule-making body for Formula One, was dissolved and replaced by the Fédération Internationale du Sport Automobile, or FISA, which would serve the same function. FISA clashed repeatedly with the Formula One Constructors Association (FOCA), which represented the teams' interests. FOCA's chief executive at the time was Bernie Ecclestone and his legal advisor was Max Mosley, while the president of FISA was Jean Marie Balestre.

The two organizations' disagreements, which came to be known as the FISA-FOCA war, resulted in several races being cancelled. Goodyear threatened to withdraw entirely from Formula One, an event which would have been commercially disastrous for the sport, so Ecclestone organized a meeting of team managers, Balestre, and other FISA representatives at the offices of the FIA in the Place de la Concorde, Paris, France. On January 19, 1981, after thirteen straight hours of negotiation, all parties present signed the first Concorde Agreement, named after the plaza in Paris where the discussions took place.

The contract's terms remain largely confidential, though its known stipulations required the signatory teams to appear and compete in every race and guaranteed their right to do so in order to assure the sport's newly acquired television public that they would have a race to watch. Also, perhaps most importantly, the agreement granted FOCA the right to televise Formula One races — this right was "leased" to Formula One Promotions and Administration, a company established and owned by Bernie Ecclestone. Another important element was the stability in rules, described as protecting the teams from "the whims of the governing body".^[2]

It expired on 31 December 1987.

Second Concorde Agreement (1987)

The second Concorde Agreement governed the 1987 to 1991 seasons inclusive.^[3]

Third Concorde Agreement (1992)

The third Concorde Agreement covered the 1992 to 1996 seasons.

Fourth Concorde Agreement (1997)

In 1995 the FIA decided to transfer Formula One's commercial rights from FOCA to Formula One Administration for a 14-year period. In exchange, Ecclestone would provide an annual payment. McLaren, Williams and Tyrrell, protested by rejecting the proposed Concorde Agreement (negotiations for which started as early as 1993). Ken Tyrrell in particular was enraged by the fact that Ecclestone, as President of FOCA had negotiated the transfer of the rights from the organization to his own company. Tyrrell also objected to the addendum to the Agreement being secret, arguing that secrecy surrounding the agreement benefited only Ecclestone (by weakening the bargaining power of the other parties).

The three teams refused to sign the proposed Concorde Agreement, initially with the support of the remaining teams. However, on September 5, 1996 the new Concorde Agreement was signed by all the teams except McLaren, Williams and Tyrrell. The agreement was to run from January 1, 1997 to 2002.

Fifth Concorde Agreement (1998)

By taking a stand against the actions of Bernie Ecclestone, the FIA and the wider commercial aspects of Formula One, McLaren, Williams and Tyrrell lost both influence in the sport and income which they would have received as signatories. A compromise was reached and on August 27, 1998, the 1998 Concorde Agreement was signed which accommodated the three teams and which expired on December 31, 2007.

Sixth Concorde Agreement (2009)

On 7 December 2004, at a meeting attended by the bosses of all the teams but Ferrari, Ecclestone offered a payout of £260,000,000 over three years in return for unanimous renewal of the Concorde Agreement, which would guarantee the continuation of Formula One in its present form at least until the expiration of that contract.

On 19 January, Ferrari announced that it had signed an extension to the 1997 Agreement to expire on 31 December 2012. Later in 2005, Red Bull and Jordan/Midland also signed an extension.^[4] On the 7 December 2005, Williams F1 became the fourth team to sign an extension to the agreement.^[5]

On 27 March 2006, the five Grand Prix Manufacturers Association-backed teams submitted their applications for the 2008 season.^[6] On 14 May 2006, the five GPMA-backed teams signed a memorandum of understanding with the commercial rightsholders (CVC/Ecclestone) which formed the basis of the next Concorde Agreement.^[7] As such, a full Concorde Agreement was not in place for the 2008 season, with the Memorandum and other individual teams acting as a stop-gap solution.

On 29 July 2008, the ten currently competing teams created the Formula One Teams Association (FOTA) to negotiate the terms of contract. After a dispute between FOTA and the FIA in the first half of 2009, a new Concorde Agreement was signed by Mosley and all of the teams, although Sauber, in transition as majority owner BMW had announced its intention of withdrawing from the sport at the end of the season shortly beforehand, waited until a controlling stake of the team was returned to Peter Sauber before signing. The new agreement provides for a continuation of the terms of the 1998 agreement, and runs until December 31, 2012. At the same meeting of the FIA World Motor Sport Council, a programme of resource restriction was also agreed upon, as were a revised set of sporting and technical regulations for the 2010 season.^[8]

Seventh Concorde Agreement (2013)

A new agreement to replace the 2009 agreement was signed in July 2013 and runs to December 2020. FIA President Jean Todt said: “We can be proud of this agreement, which establishes a more effective framework for the governance of the FIA Formula One World Championship. The FIA looks forward to continuing to fulfill its historic role as the guarantor of both regulation and safety in F1 for many years to come.”^[9]

References

• The Economist: Grand prix, grand prizes
• GrandPrix.com: Who owns what in F1 these days?
• European Commission