Budget Controversy in the World of F1



The world of Formula One continues to develop constant controversies and interesting legal issues and questions, with the second half of this season it being no exception. I've covered many of these in previous articles, but these “constant controversies” continually evolve, changing as soon as you think it's “over.” With the divisive opinions surrounding Red Bulls' “breach” of the cost cap in 2021 and continued comments around the Oscar Piastri Saga, let's get into the most recent developments with legal implications in Formula One.


Red Bull found to be in “Minor Breach” of 2021 Budget Cap

On the forefront of everyone's minds right now is the finding that Red Bull exceeded the budget cap during its 2021 campaign, where Max Verstappen controversially won the World Drivers Championship. Accusations from Mercedes and Ferrari have been circulating for a while now, but recently the FIA declared that Red Bull did in fact breach the budget cap during their 2021 campaign.


More specifically, the FIA determined that Red Bull committed a “minor” breach of the regulations, limiting teams to 145 million dollars per year, with certain exclusions. Based on current governance, an overspend of less than 5% of the overall cap (or approximately 7.25 million dollars) is considered “minor,” and subjects a team to a number of potential sanctions by the FIA. These include:

  • A fine in an amount to be determined on a case-by-case basis

  • A public reprimand

  • A deduction of Constructors' Championship points was awarded [for 2021 in this instance]

  • A deduction of Drivers' Championship points awarded

  • Suspension from one or more stages of a competition

  • Limitations on the ability to conduct aerodynamic or other testing; and/or reduction of the cost cap

As of the writing of this article the FIA has not announced which of the available sanctions it will levy against Red Bull, with leadership at Mercedes and Ferrari, among others, advocating for the harshest possible penalties against Red Bull.


This is particularly contentious because of the circumstances in which Red Bull and Max Verstappen were able to secure the World Drivers Championship last season, in light of controversial decisions made by then-race director Michael Masi. The discovery that Red Bull has breached the cost cap has reignited Mercedes fan's criticisms of last year’s championship and is also important as the first real challenge of enforcement for the FIA in the cost cap era.

What will the punishment be?


Speculating on the exact extent of the reprimand faced by Red Bull is complex and challenging, especially when looking at it from as much of a neutral perspective as one can. The FIA has a delicate balance it needs to strike with the punishment it decides to hand down to Red Bull—the FIA needs to make sure that the punishment is strong enough to set the proper precedent to deter teams in the future from breaching the cost cap, but not “so harsh,” as this is the first breach which occurred (during the first year of the cost cap era) and was relatively “minor.”


With the 2021 title already being as contentious as it is, I don't think that the FIA will choose the nuclear option of deducting drivers’ championship points from Max Verstappen to an extent that changes the result of the championship for 2021. That would just add more fuel to the fire and bring more attention to a controversy that Formula One and the FIA are trying to move away from, and to me (being as neutral as possible) seems a little bit harsh for a “minor” infringement during the first year of an implemented budget cap. At the same time, simply doing a public reprimand (the least severe punishment in my opinion) isn’t going to deter overspending nearly enough going forward.


Personally, I think this is why the FIA is taking its time determining the punishment. They're having to weigh these thoughts and considerations to decide not only what is an appropriate punishment for Red Bull now but set the precedent for what will be considered reasonable punishments for similar breaches in the future. I suspect that the FIA will choose an option somewhere in the middle—maybe implementing a fine, including a public reprimand, and imposing a restriction on testing for Red Bull. While they could in my mind foreseeably reduce Max's total points for the year, I don't think they're going to choose this option for a couple of reasons. One of which I've already mentioned is that they're unlikely to deduct points in such a manner that it would upset the championship standings for last year, and the second reason is if they only reduce his points by a small margin, they're setting a precedent that they are not going to easily be able to deduct more points from a driver or team that does this in the future.


The other thing that will ultimately affect the severity of the punishment will be the extent to which Red Bull actually breached. punishments available to the FIA under a minor breach are the same if the team over spins by a few thousand dollars up to that 7.2 million mark—it would follow that if Red Bull was closer to the low end of a breach the punishment would be less, and if they were closer to that higher end that the punishment would be stronger. Without knowing exactly how much their overspending as it is difficult to predict exactly how severe the punishment will be.

Once we know more about the size of the breach and the FIA's final decision regarding the punishment it will be worth the revisit, but until then too much is up in the air. I do not envy the people tasked with coming into this decision and I can only imagine the difficulties they are having with weighing all of the variables, and I hope that they are able to accurately find that elusive middle ground for “proper” punishment.


Zachary Bryson is a graduate of Wake Forest University with a B.A. in Economics and a Minor in Entrepreneurship. He is currently a JD candidate at Elon University School of Law, Class of 2023. You can connect with him via LinkedIn or follow him on Twitter at @ZacharySBryson.