The legal and commercial woes of the World Rally Championship
Published 05 July 2012 By: Kevin Carpenter
Being 25 years old and yet to have my driving licence people have always been surprised by my interest in motor sports. Of the five major world championships sanctioned by the governing body for world motor sport the Fédération Internationale de l'Automobile (‘FIA’) (Formula One, Rally, Touring Cars, GT1 and Endurance) my favourite has always been the World Rally Championship (‘WRC’) as it is the ultimate test of man and machine against the elements. Although it doesn’t lend itself particularly to spectators, sponsors or television, as it is a race against the clock often in remote locations over three or four days, when I first became interested in the series in the mid-1990s it was hugely popular in the UK and around the world. With drivers like Juha Kankkunen, Carlos Sainz, Tommi Makkinen and the late, great Colin McRae and classic rally cars such as the Lancia Delta Integrale, Toyota Celica, Subaru Impreza and Mitsubishi Lancer Evolution, looking back it can be said this was the golden era for the sport. 15 years or so on and the WRC is a shadow of its former self having been beset by one commercial and legal setback after another.
Throughout the 2000s more and more car manufacturers began to withdraw from the series and the exposure and quality of media coverage deteriorated leading to questions about the long-term viability of the series. But the low point came on 9 January 2012, 10 days before the season opening Monte Carlo rally, when the FIA cancelled its 11 year contract with North One Sport (‘NOS’), a former subsidiary of North One Television (‘NOT’), for NOS to promote the championship citing a “conspicuous failure” by NOS to deliver its contractual obligations and being in “fundamental breach of contract”. The contract was set to run until 2020. This threw the series into turmoil as the promoter holds all the commercial and media rights to the WRC and without one the teams and manufacturers would be unwilling to invest. But just how did it get to this? Here we delve into the murky worlds of fraud and corruption…
In February 2011 NOT sold its sports division NOS to the Russian business Convers Sports Initiatives (‘CSI’), owned by the now infamous Vladimir Antonov, with NOT’s CEO Neil Duncanson recently saying, “It seemed like the perfect scenario for the sport – a huge well funded operation that was totally committed to the WRC for the future. And everything was fine until the wheels came off with a banking scandal which was shattering for us all.” Bells may now be ringing for some of you and I have written about Mr Antonov previously. He was arrested by UK police in November 2011, under an extradition warrant, over a money laundering and asset stripping investigation in connection with Snoras Bank in Lithuania. Mr Antonov owned a controlling stake in the bank which had to be nationalised after regulators discovered a huge asset shortfall owing to alleged fraudulent activity. CSI said it would be “business as usual” but it soon became apparent to the FIA, and other sporting entities owned by CSI including Portsmouth Football Club, that this would not be the case.
The FIA managed to secure a deal with Eurosport to screen Monte Carlo but a longer term deal did not materialise as expected reportedly due to European employment law, whereby under the Transfer of Undertakings (Protection of Employment) Regulations Eurosport may have been required to offer jobs to those employees made redundant by the collapse of NOS. As a result the FIA issued a press release on 7 February 2012 calling for expressions of interest from potential promoters. The aim was then to have a decision made by the time the World Motor Sport Council (‘WMSC’) met in Paris on 15 June. As an interim measure they struck a rolling deal with the European Broadcasting Union ('EBU') to film, produce and broadcast the series and to distribute it to a global audience.
In the meantime two further issues arose. Firstly Nokia ended a lucrative £2.5m per year title sponsorship deal with the championship, with WRC President Jarmo Mahonen saying, "this is quite a big loss...we didn't see it just as money coming in, Nokia was going to be a partner." Mahonen admitted the on-going uncertainty regarding the future of the series was a contributing factor.
Then a dispute arose with the organisers of the individual rallies themselves, whereby none of thirteen proposed events on the 2013 calendar had signed the contract presented to them by the FIA with a deadline of 8 June. They objected to a £80,000 fee for the production and distribution of television and the use of vital safety tracking and timing systems. Behind the scenes discussions appeared to have resolved this in time for the 15 June WMSC meeting whereby the thirteen round calendar for next year was confirmed. However a promoter was not announced at that meeting as expected, rather a press release said that a shortlist had been drawn up following the expression of interest and further discussions with those candidates would lead to a recommendation being made to the WMSC by September 2012 at the latest. Then just this week the FIA announced that it had extended its relationship with the EBU to the end of the 2012 season saying that the EBU had, “secured comprehensive worldwide coverage to viewers in 120 countries."
So what for the future? Well the reality is that, despite calls for more traditional rallies to be put back on the calendar, without a promoter and significant sponsor the places that are willing to pay the most money will be looked at first, mirroring the new frontiers entered by Formula One in recent times. Yet there is a tension for FIA President Jean Todt, who does actually care about rallying and wants to return it to former glories, as he believes the future of the series lies outside Europe but current and potential manufacturers are looking at cost cutting measures. Also the WRC has been dominated by one driver, with Sebastian Loeb having won the championship for the past eight years in a row. An incredible achievement but one which is not attractive to any stakeholder, much like when Michael Schumacher dominated Formula One. You only have to look at how commercially successful Formula One now is with seven different winners in the first seven races this season. Part of this is due to a lack of quality drivers being chosen by WRC teams, rather it is those who have the most financial backing who get the seat. However Mini are back in the sport, with Volkswagon to join next year, and with a new promoter on the horizon perhaps there is reasons to be cheerful for me and other rally fans.
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- Tags: Anti-Corruption | Broadcasting | Commercial Law | European Broadcasting Union | Racing | Vladimir Antonov | World Motor Sport Council | World Rally Championship
Kevin is a advisor and member of the editorial board for LawInSport, having previously acted as editor. In his day-to-day work he has two roles: as the Principal for his own consultancy business Captivate Legal & Sports Solutions, and Special Counsel for Sports Integrity at leading global sports technology and data company Genius Sports.