International enforcement of arbitral awards: Giedo van der Garde v. Sauber

Sauber_F1_2014_Car
Published: Monday, 13 April 2015. Written by Gary Hughes No Comments

This article analyses racing driver, Giedo van der Garde’s, dramatic last minute actions against Sauber in the Australian courts to try to enforce the terms of a Swiss arbitral award (in his favour) and secure his race seat for the Australian Grand Prix. The author then reflects on wider learning points relating to the international enforcement of arbitral awards, and identifies specific contractual issues to keep in mind.

Background

Albert Park in Melbourne is a splendid, picturesque, lake-side venue for Formula 1® to traditionally commence its motor racing calendar for the year. However, for the last two years, controversy off the track has threatened to overshadow the motorsport spectacle on-track.

In 2014, the controversy was noise – or, rather, lack of it.1 Smaller V6 turbocharged engines had been introduced in an effort to enhance fuel efficiency and contain rampant rising costs for teams. Purists and die-hard fans were dismayed that the visceral high-pitched scream of traditional F1® race engines had gone in favour of much quieter, tame-sounding racing. The Australian Grand Prix promoter muttered threateningly about breach of contract,2 and other host nations later on the calendar threatened to cancel their event promotions deals, but Mr Ecclestone made soothing noises and later regulation changes would serve to unmuffle the cars to a degree.

In 2015, the controversy was different, and focused on the Sauber team rather than the whole (quiet) grid. A driver from Holland, Giedo van der Garde, sued in the Victorian State Courts to enforce an overseas arbitral award that had been given in his favour against Sauber. That award (applying English law, in a Swiss arbitration) declared that he had a valid contract for driving, testing, and promotional services, which Sauber had repudiated by appointing a different race driver in his place for the 2015 season.

His enforcement action in Australia succeeded. On 11 March 2015, two days before first practice for the Grand Prix, Sauber were ordered not to deny him a race seat in the team,3 leading to much legal and media drama before and during the event. While on the surface a straightforward breach of contract claim, the underlying issues ironically trace directly to the overall failure to adequately control team costs, and how that has changed F1’s® commercial dynamics.

 

The underlying dispute and the Swiss arbitral award

The front-running and richer teams generally have no problem with their own levels of spending and tend to attract most of the sponsorship and direct financial remuneration generated by F1®. The minnows and lesser-resourced teams at the rear of the pack tend to be trapped in that position and, while periodically demanding cost-containment rules and a process that will enable the revenue streams to be distributed in a more equitable way, to most observers it seems little really changes. Both Caterham and Marussia effectively collapsed during last season5 and the grid for 2015 is one of the smallest in years.

What this has led to in Formula 1 in recent years is a radically split field of contestants. This is of course obvious between rich teams and poor teams. Less obvious, but perhaps more damaging, is the polarising effect between leading drivers who are handsomely paid by a team for their efforts6 and other drivers who pay handsomely in sponsorship or direct contribution in order to race for a team.7 Mr Van Der Garde has had a successful racing career in various machinery, and is clearly no slouch as a race driver, but his relationship with Sauber was in the second of those categories.

The arbitration proceedings were brought in the joint name of Mr Van der Garde and his Dutch management company and, in effect, were an attempt by the driver and his substantial corporate backers to force Sauber to honour the sums that had been paid in order to him secure a race seat with the team. The basis for the claim was that he had a valid agreement for driving, testing, and promotional services dating to January 2014. That agreement enabled him to initially be the test and reserve driver for Sauber and then, in mid-2014, Sauber exercised an option to promote him to the racing seat.

However, later in that year, while around them Caterham and Marussia were collapsing, and presumably desperate to ensure its own survival, two drivers became available to Sauber with more sponsorship and financial muscle that they could bring to support the team (reportedly, some 40m euros). Sauber then announced its 2015 driving line-up would be Marcus Ericsson and Felipe Nasr, replacing Mr Van der Garde.8

The claimants then took a claim to arbitration, applying English governing law, but under the auspices of the Swiss Chambers' Arbitration Institution.9 He sought what was effectively specific performance of his driving contract with Sauber. On 2 March 2015, Arbitrator Todd Wettmore found in his favour and against the Sauber team. The Arbitrator ordered Sauber to refrain from taking any action the effect of which would deprive Mr Van der Garde of his contractual rights to participate in the F1® 2015 season as Sauber’s nominated driver.

By that point in time, the preparations for Sauber’s season debut at Albert Park were already well-advanced and, when the team arrived in Australia, Mr Van der Garde’s lawyers rapidly sprang the enforcement trap.

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About the Author

Gary Hughes

Gary Hughes

Gary is a New Zealand lawyer advising on commercial rights, marketing, competition law and events management aspects of sport. He works with sports administrators, sponsors, and tournament organising bodies, or teams/athletes directly.

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