FIA Formula One World Championship - World Motor Sport Council - An extraordinary meeting of the World Motor Sport Council was held in Paris on 29 April 2009. The following decisions were taken: 30/04/2009

[1] Decisions of the World Motor Sport Council on Cost Cap Regulations
[2] Formula One Cost Cap Q&A
[3] Teams Response

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2010 FIA Formula One World Championship
Applications to compete in the 2010 FIA Formula One World Championship are to be submitted to the FIA during the period 22-29 May 2009. Teams must state in their application whether they wish to compete under cost-cap regulations.

The maximum number of cars permitted to enter the Championship has been increased to 26, two being entered by each competitor.

The FIA will publish the list of cars and drivers accepted on 12 June 2009, having first notified unsuccessful applicants.

Cost Cap Regulations

From 2010, all teams will have the option to compete with cars built and operated within a stringent cost cap.

The cost cap for 2010 will be £40m per annum*. This figure will cover all team expenditure except:

• Marketing and hospitality;
   
• Remuneration for test or race drivers, including any young driver programmes;
   
• Fines or penalties imposed by the FIA;
   
• Engine costs (for 2010 only);
   
• Any expenditure which the team can demonstrate has no influence on its performance in the Championship;
   
• Dividends (including any tax thereon) paid from profits relating to participation in the Championship.

* For the purposes of these Regulations, the financial year is 1 January to 31 December.

A new Costs Commission is being set up to monitor and enforce these cost-cap financial regulations. The Costs Commission will consist of a Chairman and two other Commissioners, appointed by the WMSC for terms of three years.

One Commissioner should be a finance expert and the other should have high level experience in motor sport. The Chairman should have appropriate experience and standing in motor sport or sports governance. All members of the Costs Commission shall be independent of all teams.

In addition to the payments which it already makes to the top ten teams in the Championship, Formula One Management, the commercial rights holder, has agreed to offer participation fees and expenses to the new teams. This includes an annual payment of US$10 million to each team plus free transportation of two chassis and freight up to 10,000 kg in weight (not including the two chassis) as well as 20 air tickets (economy class) for each round trip for events held outside Europe.

To be eligible for this, each new team must qualify as a "Constructor" and demonstrate that it has the necessary facilities, financial resources and technical competence to compete effectively in Formula One.

To enable these cars to compete with those from teams which are not subject to cost constraints, the cost-capped cars will be allowed greater technical freedom.

The principal technical freedoms allowed are:

1. Movable wings, front and rear.
2. An engine which is not subject to a rev limit.

The teams will also be allowed unlimited out-of-season track testing with no restrictions on the scale and speed of wind tunnel testing.

Changes applicable to all teams

It was confirmed that from 2010, refuelling during a race will be forbidden in order to save the costs of transporting refuelling equipment and increase the incentive for engine builders to improve fuel economy (to save weight).

It was also confirmed that tyre blankets will be banned and that the ban on other tyre-heating devices will be maintained.

Full details plus information on further amendments to the 2010 Sporting and Technical Regulations will be available shortly on www.fia.com.

By exception, if supported by the Safety Commission, the FIA WMSC may approve the issue of the Formula One Super Licence to persons judged by the Council to have met the intent of the qualification process.

WORLD RALLY CHAMPIONSHIP
The WMSC at its meeting on the 7 December 2007 agreed the calendar for the 2010 World Rally Championship based on a two-year rotation of 24 events over 2009 and 2010.

Since that time the events in Indonesia (20 June) and Russia (18 July) have not passed inspection and are not ready to run in the 2010. Also, Rally Monte Carlo (24 January) may ask to rejoin the calendar in 2011 rather than 2010.

The events that are not available to be included in the previously issued calendar will be replaced by proven existing events that have run this year.

FORMULA TWO CHAMPIONSHIP
Points for the title will be awarded at each race according to the previously agreed scale but a driver may now drop his scores from two races. This is due to the very short time for preparation for the Championship and has been added to reduce the influence of any unreliability on results in the first year.

Why does Formula One need cost capping?

Formula One faces a period of great uncertainty during this harsh recessionary period. Funding a team is increasingly seen as a discretionary spend for the majority of team owners and sponsors. To ensure a healthy grid all are agreed that costs need to be cut.

Two main philosophies have emerged, either i) reduce activity levels through very restrictive technical rules, plus a degree of standardization if required; or ii) restrict the money that teams are allowed to spend (cost capping).

The FIA believes that unfettered technical competition is part of Formula One's DNA, and would like to see this flourish, but in an environment of strong, responsible and innovative management, not a spending race. For these reasons cost capping is preferred.

What is covered by the cost cap?

Everything except:

• Marketing and promotion – we want Formula One teams to look good and to entertain their partners. We want manufacturers to show off their cars at exhibitions and city centre displays, and we want teams and their sponsors to promote Formula One through inclusion in advertising campaigns.
   
•  Drivers and young driver programmes – Formula One is the pinnacle of motor racing. Fundamental to this is attracting the world's best drivers. Moreover we wish to encourage continued investment in young driver programmes.
   
•  Engine costs – In order to attract manufacturer owned teams to take up the cost capping option, the FIA have decided to exclude engine costs for 2010 (only)

Furthermore, we are allowing manufacturers to honor existing supply arrangements, provided there is no element of subsidy that could have a cartel-like affect on the engine market.

How did the FIA arrive at the £40m figure?

We arrived at the figure by analysing both revenues and costs in Formula One.

We know what the FOM (Formula One Management) revenue is likely to be in the future, and we have some understanding of realistic sponsorship revenues during the recession. Taken together, it's possible to project total external revenues for all finishing positions in the Championship. At £40m we believe that 70 per cent of the grid can generate a profit. This transforms the business case for owning a Formula One team, for both manufacturers and private investors. The desired net result is to have a very healthy commercial environment for present and new owners.

We also had a good look at costs, and believe that £40m in combination with greater technical freedom will allow engineers to create Formula One cars even more interesting and exciting than today's cars.

Will the £40m cap for 2010 be changed for future years?

As set out in the Regulations, the cap for future years will be decided by the FIA. In setting future years' limits, the FIA will have regard to the progress of the project and the feedback from all stakeholders to the sport.

How does the FIA intend to police the cost cap?

Throughout the construction of the Regulations we have worked with expert forensic accountants.

The Regulations allow for the establishment of a Costs Commission to monitor and assist teams in complying with the Regulations. The Costs Commission will appoint auditors, and other financial experts as required, in order to do this.

A key factor is that all cost capped teams are businesses engaged in exactly the same activities and this enables consistent interpretation of the principles of the regulations. It is difficult to hide engineering activity or to falsify accounts consistently, given the traceability of transactions in today's world and the access and inspection powers which the Costs Commission will have. The penalties for defrauding the FIA with regard to any willful transgression of any Regulation or any subversion of an investigation are well established.

Is a Costs Commission really needed?

The emphasis is on teams to demonstrate compliance, and to pro-actively seek clarification and interpretation of the Regulations. As the Cost Cap Regulations are new the FIA has decided to provide an appropriate resource, staffed with a small number of financial and technical experts, to deal with such issues, and to monitor compliance, such that the Regulations are effective.

Who pays for the Costs Commission, auditors and other experts, and doesn't this just add costs, rather than removing them?

The cost capped teams will each pay an equal contribution to cover these costs. The costs involved will represent a tiny fraction of the costs saved in Formula One.

What is the penalty if a team exceeds the cost cap?

This depends on the case. The International Sporting Code covers transgressions in the same manner as for the technical or sporting regulations. There are no 'fixed penalties'. The Cost Commission will judge the degree of misdemeanor and advise the FIA , who will determine any penalty.

What measures are there to prevent teams spending money this year on a car that will compete under cost cap in 2010?

The teams must demonstrate that they have adhered to the spirit of the regulations and spend no more than 50% of the value of the 2010 cap on the development of the 2010 car (in 2009). Furthermore, there are limits on the value of stock of car parts which can be carried into 2010.

How will you stop manufacturer backed teams from running hidden F1-related projects in their parent companies?

The question is actually asking 'how will we stop manufacturer teams from cheating'. The principles of determining a fair market value for all activities which are undertaken for the benefit of a team (whether a manufacturer or not) are clearly set out in the Regulations.

No team would wish to be exposed as cheating, so we expect a healthy amount of self-policing. However, the rules are clear on this point, such activities must be declared and appropriately valued. Bear in mind the access that the costs commission and auditors have and their ability to compare reported costs across all cost capped teams.

Will teams be allowed to buy parts from other teams/manufacturers?

Yes, according to the FIA regulations, but one should bear in mind that contractual arrangements with the Commercial Rights Holder will place restrictions on such activities. Inter-team transactions are covered by the regulations.

How many teams do you expect to take up the budget option?

All those who wish to transform the commercial basis of participation for their owners and investors. The FIA believes that cost capping will prove attractive, and it hopes that over time all teams will join. So far, interest has been extraordinarily high from both existing teams and potential new entrants.

If a team decides not to become cost capped now, can it do so at a later date?

Yes, a team will be able to opt to become cost capped in advance of each year of its participation in the Championship.

Are you worried that F1 will effectively become a two-tier championship?

There is one set of Technical Regulations and as always there are choices for all teams as to how they decide to attack the Championships.

Williams F1 Team - The Williams F1 team acknowledged the FIA World Motor Sport Council decision to introduce a budget cap for 2010 at its meeting on 29 April 2009. Frank Williams said, "Williams has supported the introduction of a budget cap since the idea was first put forward early in 2008. Since then FOTA has made tremendous steps forward on costs but the rationale for a budget cap has also grown even stronger. We would like to see all the teams operating to one set of regulations and under a budget cap in 2010 and that is the position we will be advocating within FOTA when we meet next week. We understand that this will represent a serious challenge for some of the teams but we expect that FOTA will work together to find a unified and constructive way to take the FIA's initiative forward."

Brawn GP Team - Following the hearing in Paris on Tuesday 14 April, the International Court of Appeal today confirmed that the Brawn GP team's BGP 001 car is fully compliant with the 2009 Formula One Technical Regulations. Brawn GP Team Principal Ross Brawn said: "We are pleased with the decision reached by the International Court of Appeal today. We respect the right of our competitors to query any design or concept used on our cars through the channels available to them. The FIA Technical Department, the Stewards at the Australian and Malaysian Grands Prix and now five judges at the International Court of Appeal have confirmed our belief that our cars have always strictly complied with the 2009 Technical Regulations. The decision of the International Court of Appeal brings this matter to its conclusion and we look forward to continuing on the track the challenge of what has been a very exciting start to the 2009 FIA Formula One World Championship."