How solid is FOTA’s legal argument? A lawyer looks at the FIA-Ferrari letters

Posted on | Author Keith Collantine

Ferrari's Luca di Montezemolo and the FIA's Max Mosley are both lawyers
Ferrari's Luca di Montezemolo and the FIA's Max Mosley are both lawyers

What should we make of the legal letters sent between Ferrari and the FIA, which were made public by Max Mosley last week?

The FIA give the impression that Ferrari’s case is flimsy and full of holes, but the Ferrari representatives hit back that the FIA have failed to address the substance of the matter.

It’s fairly technical stuff but it could have a significant bearing on the next phase of the FIA-FOTA row. Not being a legal expert, I thought it would be useful to get a lawyer’s opinion on the letters. Here’s what he had to say after reading the exchange of letters:

“I’ve had a look at the Ferrari – FIA correspondence and done a bit of Googling. Interesting stuff. Its impossible to work out exactly what is going on without being able to see the actual contractual documents they are talking about. Obviously, its a very complicated dispute.

“Looking at the correspondence, what does come across is that the FIA letters seem more directed towards their media image than actually addressing the legal points made by Ferrari. Although the letters have the facade of presenting a legal argument, they do not actually present much in the way of good legal points, and a lot of their allegations about Ferrari’s position altering or being contradictory seem unfair to me. Ferrari’s letters were much more to the point and cogent legally.

“It also seems that Ferrari have a very strong case for believing they are entitled to veto the 2010 regulations. The French court view at first instance appears to have accepted this at least, which is a strong indicator that Ferrari are right. Obviously France is not a jurisdiction I understand much about, but I have gathered Ferrari were effectively seeking an interim injunction restraining the FIA from taking further steps in implementing the 2010 regulations. Getting such injunctions is broadly about demonstrating two things – that the matter is urgent (because imminent harm will occur to the applicant if the injunction is not granted), and that there is a certain percentage chance of the applicant succeeding were the matter to go to a final trial (though I do not at what standard the threshold test would be set in France).

“What is key to note is that whether or not an injunction is granted, there is no final decision in France as to whether or not Ferrari are right (plus, what is finally decided in France may not be the last word on what is decided in other jurisdictions, although the existence of any final French judgement would be highly relevant in any related proceedings brought elsewhere). Furthermore, it appears there has been no final decision even on the injunction point yet – it seems there is some appeal route for Ferrari, although I don’t know what it is or whether they are pursuing it. It seems though that there may still be a chance of Ferrari getting the injunction in France.

“The court in Paris seems to have taken some point against Ferrari regarding when they exercised the veto, particularly the fact that Ferrari did not exercise it at the WMSC meeting. It’s unclear whether the point the court was making is that the veto may only be exercised at a certain time otherwise it is lost/waived, or whether because Ferrari exercised the veto relatively late, that indicated that on the facts there was insufficient urgency/it was implicit that Ferrari would not suffer damage in the immediate future. On the former argument, which would be a substantive point affecting the ultimate outcome, Ferrari appear from the correspondence to argue that there was no effective way/mechanism to exercise a veto at the WMSC meeting and therefore their veto right cannot be lost by a failure to exercise it there. That depends on the facts obviously, but if the facts support Ferrari the legal argument is again strong.

“It is much harder to tell who is right about whether Ferrari are contractually obliged to compete in Formula 1 next year. To some extent this appears to be interrelated with whether the FIA are entitled to impose the 2010 regulations and whether Ferrari can veto them. The French proceedings have no bearing on this (save to the very limited extent they give an indication on the veto point).

“What is clear is that it is extremely difficult to effectively injunct someone to compete in an F1 championship – that is a tough order for any court to effectively enforce/supervise, and so I think its very unlikely any court in the world would grant such an injunction. What that probably means is that both Ferrari and the FIA know that as between them, what is at stake if Ferrari do withdraw is a very long and costly legal battle to determine whether Ferrari must pay any damages to the FIA. I doubt therefore whether this legal issue is a major consideration (although it must be a factor) in Ferrari’s ultimate decision to take part or not.

“For what it’s worth, it looks to me as though certain things are still up in the air which those concerned would like to be clear on at this stage, and therefore it’s too soon for an agreed solution. Whatever posturing both sides get up to around now (including publishing the final entry list), I predict a negotiated settlement inside about the next six weeks, with a single F1 championship continuing.”

I offer this as a starting point for a discussion and it would be especially interesting to hear if other legal minds have a view that tallies – or not – with the one expressed above.

You can download the correspondence in full from the FIA’s website.