Following the submission of all required documentation by all ten Formula One Teams, the Cost Cap Administration carried out the first ever review process under the FIA Formula 1 Financial Regulations (“Financial Regulations”). These new Financial Regulations are a very complex set of rules that competitors were required to adapt to for the first time.
AMR GP Limited (“AMR”) was found to be in procedural breach of the Financial Regulations notwithstanding the fact that its Relevant Costs during the 2021 reporting period were under the Cost Cap. However, in the presence of specific circumstances, the Cost Cap Administration offered to AMR an Accepted Breach Agreement (“ABA”) to resolve this matter. That offer was accepted by AMR. The Cost Cap Administration recognised that AMR has acted cooperatively and in good faith 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 AMR has sought or obtained any undue advantage as a result of the breach.
An ABA dated 25 October 2022 was therefore entered into by and between the Cost Cap Administration and AMR pursuant to Article 6.28 of the 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.
Summary of ABA terms and sanctions
In accordance with the findings of the Cost Cap Administration, AMR has acknowledged that the Reporting Documentation submitted by it included the following incorrectly excluded and/or adjusted costs:
1. Cost pursuant to Article 3.1(h)(i) of the Financial Regulations (concerning costs in respect of the new F1 Team headquarters);
2. Understatement of Relevant Costs in respect of the provision set forth by Article 4.1(b)(ii) (concerning R&D tax credit);
3. Costs pursuant to Article 3.1(h)(i) of the Financial Regulations (concerning cost in respect of the new F1 simulator);
4. Cost pursuant to Article 3.1(o) of the Financial Regulations (concerning wind tunnel additional fees);
5. Cost pursuant to Article 3.1(i) of the Financial Regulations (concerning certain signing bonus cost);
6. Understatement of Relevant Costs in respect of provisions set forth by Article 4.1(a)(ii) of the Financial Regulations (concerning the use of Transferable Components);
7. Understatement of Relevant Costs in respect of provision set forth by Article 4.1(f)(i)(B) of the Financial Regulations (concerning Used Inventories);
8. Cost pursuant to Articles 3.1(h)(i) and 3.1(i) of the Financial Regulations (concerning service desk costs);
9. Cost pursuant to Article 3.1(i) of the Financial Regulations (concerning cost of catering services provided to personnel at its factory headquarters);
10. Cost pursuant to Article 3.1(i) of the Financial Regulations (concerning cost of desks and chairs);
11. Understatement of Relevant Costs in respect of provisions set forth by Article 4.1(h) of the Financial Regulations (concerning unrecorded costs and losses in respect of the cost of services rendered by sponsors);
12. Cost pursuant to Article 3.1(j) of the Financial Regulations (concerning cost of services rendered by outsourced personnel);
AMR has therefore accepted that is has breached 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 because the Reporting Documentation submitted by it included incorrect excluded and/or adjusted costs listed above.
On that basis, AMR has accepted the imposition of the following sanctions in full and final settlement of the Procedural Breach:
a) AMR must pay a Financial Penalty of USD 450,000 to the FIA within 30 days of the date of execution of the ABA (Article 9.5 of the Financial Regulations);
b) AMR 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 AMR 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 Cost Cap Adjudication Panel.