It is no secret that Ferrari is one of the most powerful teams in Formula One. It is the only team that has been competing in F1 continuously since the championship was launched in 1950, and it is richly rewarded for doing so. The precise extent of Ferrari’s power remains to be seen, but its sometimes-fractious relationship with F1’s governing body, the Fédération Internationale de l’Automobile, has shed new light on it.

At the heart of Ferrari’s influence is a veto, which is understood to allow the team to block changes to F1’s technical and sporting regulations, as well as the introduction of new terms. However, it has come to light that the FIA has said this veto only applies to changes to the regulations that would require Ferrari to alter its car. It is a crucial caveat.

Ferrari’s benefits for being F1’s longest-standing team were considered to be the stuff of sporting legend until 2012, when written evidence of them was uncovered in the prospectus for the planned flotation of F1 on the Singapore stock market. The flotation stalled due to the financial crisis just weeks before it was due to take place that year, but the prospectus had already been produced. It itemized the key terms at the heart of F1, including Ferrari’s perks. Perhaps the most valuable ones are financial.

F1’s prize fund comprises 65 percent of the sport’s underlying profits, and it is divided among the top 10 teams. Last year, they shared $863.1 million in prize money but several get more than others, and Ferrari is one of them.

Ferrari is one of three that shares in what is known as the Constructors Championship bonus fund. This comes to at least $100 million annually and is open to the top three teams based on the number of races won in the four seasons prior to 2012. It gives Ferrari a minimum of $30 million annually, but it doesn’t stop there -- the team also gets 5 percent of F1’s profits all to itself. This comes to at least $62.2 million every year, bringing Ferrari’s guaranteed prize money to nearly $100 million before a single race begins.

Win or lose on the track, Ferrari is a force to be reckoned with in Formula One. LAT PHOTOGRAPHIC

Ferrari also wields considerable influence in F1 through having a seat on the board of the sport’s parent company, Delta Topco, and options on a 0.25 percent stake in it. Ferrari even has the right of first refusal to supply cars for F1’s support series if the Porsche Supercup ever vacates this place. Most controversially, the prospectus revealed that “in respect of Ferrari only, Ferrari may terminate if the regulatory safeguards agreed between the FIA and Ferrari do not allow Ferrari to veto any change to the regulations already announced or introduced (subject to certain exceptions).” The veto had long been the subject of speculation, but it is now talked about openly. In October, the FIA distributed a press release revealing that it had agreed with F1’s commercial rights holder, Formula One Management, to set a limit on the price of customer engines and gear boxes supplied to third-party teams. The engines alone cost around $20 million annually, but the FIA and FOM’s boss Bernie Ecclestone wanted to reduce the price to around $13 million. The current high price fueled the collapse of Caterham and Marussia last year, with Renault and Ferrari respectively being two of their largest creditors. The decision to cap engine costs was taken by the Strategy Group which is formed from the FIA, FOM and six leading teams. They all have equal votes, and according to the press release, the cap was “put to the vote and adopted with a large majority.” It reflects recent comments from Ecclestone, who said that as a result of the dominance of Ferrari and Mercedes, “we need an independent engine supplier. I’ve been on about this now for a year and a half.” However, although the Strategy Group voted in favor of a cap on the engine price, Ferrari didn’t let it call the shots. The FIA’s press release added that “Ferrari SpA decided to go against this and exercise the right of veto long recognised under agreements governing F1.” According to the press release, “in the interest of the championship, the FIA has decided not to legally challenge Ferrari SpA’s use of its right of veto.” Instead, the FIA agreed to work with F1’s manufacturers -- Ferrari, Mercedes and Renault -- to come up with ways by Jan. 15 to reduce the cost of engines. However, Ferrari has already put up resistance to this. Speaking on Monday at Ferrari's traditional pre-Christmas press briefing, its president Sergio Marchionne said the company would rather walk away from F1 than face rules it did not like. "We go to the track to prove to ourselves and to everyone our ability to manage the power unit. If we begin to undermine this advantage, Ferrari has no intention of racing," he said. "I understand very well the difficulties that smaller teams face, but this is something that FOM has to solve; it is not something Ferrari has to solve." It appears that the Italian outfit objects to the FIA's moves to push through a reduction in engine costs, which would thereby increase competition from F1's minnows, even though it has already vetoed the price cap. This isn't Ferrari's only objection. Earlier this month, the FIA's decision-making body, the World Motor Sport Council, also voted in favor of giving Ecclestone and FIA president Jean Todt a mandate that will grant them additional power "to make recommendations and decisions regarding a number of pressing issues in Formula One, such as governance, engines and cost reduction." In the wake of this, Ecclestone told the BBC that Ferrari had written a legal letter to the FIA arguing that the mandate contravenes its contracts with the teams, though he added that he is not concerned. "The only thing we could do is to ignore what Ferrari have said and carry on with it and say: 'You've got a choice -- you can leave or go to arbitration and see what the arbitrators think.' I think if we went to arbitration, we'd win easy." The reason for this may relate to the statement in the FIA's October press release about the possibility of challlenging Ferrari's veto. It isn’t the first time the FIA has raised this matter. In 2009 it was locked in a bitter dispute with Ferrari about another cap -- this time, a $60 million limit on team budgets, which was due to be introduced in 2010. The cap was contained in regulations approved by the World Motor Sport Council, on April 29, 2009, despite Ferrari voting against it as it wanted a free-reign on spending. Accordingly Ferrari’s lawyer Henry Peter wrote to Pierre de Coninck, the FIA’s then secretary general for sport, on May 12, 2009, to exercise its veto. However, de Coninck replied the following day stating that Ferrari’s veto “could only be said to apply to changes to the Sporting or Technical Regulations which would require Ferrari to alter its car.” This explains why the FIA believed Ferrari had no right to veto the budget cap regulations. It may also explain why the FIA mentioned in its October press release the possibility of legally challenging Ferrari’s veto. That said, the FIA eventually gave up in its dispute with Ferrari in 2009 as the budget cap was dropped after eight teams threatened to leave F1 and start their own series. Ferrari’s veto was formally granted to it by the FIA in a letter dated Jan. 17, 2005. It is understood that Ferrari founder Enzo Ferrari first requested the veto when his team was powered by a V12 engine despite V10s dominating the field. Ferrari asked for a right to block changes to prevent its engine from being banned and the rest is history. FIA president, and former Ferrari team principal Todt recently explained the part that Enzo himself played in this. “Enzo Ferrari was the founder, and he was very isolated in Maranello compared to all the British teams. He was alone and you will remember, in the 1980s, Ferrari was the only full car manufacturer of engine and chassis. “And he was facing private teams, like Williams, Lotus, McLaren and Brabham that were all using the same engine. If I remember it was a Ford Cosworth engine. So he got that (veto) in his discussions to implement.” The veto is now enshrined in the agreement which FOM and the FIA signed on July 22, 2013, committing them to new commercial terms. This reportedly confirms that Ferrari has a right of veto “in respect of the introduction/modification of any technical or sporting regulations (except for safety requirements).” The veto can only be used if “Ferrari reasonably considers that the new regulations are likely to have a substantial impact on its legitimate interest.” In addition, the exercise of the right of veto must not be “prejudicial to the traditional values of the Championship and/or the image of the FIA.” Interestingly, in de Coninck’s reply of May 13, 2009, he accused Ferrari of breaking the teams’ commitment under F1’s commercial agreements to “do nothing prejudicial to the image and dignity of Formula One as a high class sport.” De Coninck said, “we fail to see how Ferrari’s repeated threats to leave the championship could be said to comply with these terms.” It is interesting because, since then, a number of teams have threatened to withdraw from F1 but the FIA has not taken action against them, so it remains to be seen whether its claim would hold water. The FIA often has to drive a fine line between upholding the regulations and acting in the best interests of F1. If it didn’t, the landscape of the sport might be very different.

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