Concorde Agreement

The Concorde Agreement is a contract between the Fédération Internationale de l'Automobile (FIA), the Formula One teams  and the Formula One Administration. The Concorde Agreement defines the agreement about how the teams race, and how the money is divided up. The money includes the television revenue and prize money.

There have been six Concorde Agreements since 1981. The terms of all of the agreements have been kept a secret. The secrecy was broken by racing journalist Forrest Bond when the 1997 Concorde Agreement was published in 2006 by RaceFax.

The basic requirements of the agreements are to be professional and to increase the success of Formula One. The biggest requirement of the teams to participate in every race. This makes Formula One better for the broadcasters. Broadcasters spend a large amount of money to televise the races. In return for racing, the teams were guaranteed a percentage of the sport's revenue.

 Background 
The Commission Sportive Internationale, was an organization that reported to the FIA. They were the rule-making group for Formula One. In 1979 they were replaced by the Fédération Internationale du Sport Automobile, or FISA.

The race teams were represented by the Formula One Constructors Association, or FOCA. At the time, FOCA's chief executive was Bernie Ecclestone and his legal advisor was Max Mosley.

FISA and FOCA had a number of disagreements. Some teams believed that FISA was favoring the major manufacturers. The teams were also unhappy about how the money in Formula One was being distributed.

 First Concorde Agreement (1981) 
The FISA and FOCA disagreements became known as the FISA-FOCA war. This resulted in several races being canceled. Goodyear threatened to quit suppling tyres to Formula One. This would have been a disaster to the sport.

Bernie Ecclestone of FOCA organized a meeting of team managers and FISA representatives. The meeting was held at the offices of the FIA in the Place de la Concorde, Paris, France. At the meeting, they negotiated for thirteen straight hours. On 19 January 1981, the first Concorde Agreement was signed. The agreement was named after the plaza in Paris where the discussions took place.

The contract terms remain mostly confidential. It is known that teams were required to appear and compete in every race. This would ensure that the newly acquired television public that they would have a race to watch. The agreement also granted FOCA the right to televise Formula One races. This may have been the most important part of the agreement. This right was "leased" to Formula One Promotions and Administration, a company created and owned by Bernie Ecclestone. Another important part of the agreement was that the rules would be kept stable.

The first Concorde Agreement expired on 31 December 1987.

 Second Concorde Agreement (1987) 
The second Concorde Agreement covered the  through  seasons.

 Third Concorde Agreement (1992) 
The third Concorde Agreement covered the  through  seasons.

 Fourth Concorde Agreement (1997) 
In 1995 the FIA decided to transfer Formula One's commercial rights from FOCA to Formula One Administration for a 14-year period. In exchange, Ecclestone would make an annual payment. McLaren, Williams, and Tyrrell did not like this arrangement. They rejecting the proposed Concorde Agreement. Ken Tyrrell was upset that Ecclestone, as President of FOCA, had transfer the rights to his own company. Mr. Tyrrell also did not like that the Agreement was secret. He believed that only helped Ecclestone. He felt it weakened the bargaining power of the teams.

On 5 September 1996 the new Concorde Agreement was signed by all the teams except McLaren, Williams, and Tyrrell. The agreement was to run from 1 January 1997 to 2002.

 Fifth Concorde Agreement (1998) 
Taking a stand against Bernie Ecclestone, the FIA, and the commercial aspects of Formula One put McLaren, Williams, and Tyrrell in a bind. The three teams lost influence in the sport and income they would have received if they had signed.

A compromise (agreement between all parties) was reached. On 27 August 1998, the 1998 Concorde Agreement was signed. This agreement expired on 31 December 2007.

 Sixth Concorde Agreement (2009) 
A meeting on the new Concorde Agreement was held on 7 December 2004. All of the teams but Ferrari attended the meeting. Ecclestone offered a payment of £260,000,000 over three years if all the teams would renew of the Concorde Agreement.

On 19 January 2005, Ferrari announced that it had signed an extension to the 1997 Concorde Agreement. The extension would expire on 31 December 2012. Later that year, Red Bull and Jordan/Midland also signed an extension. (Jordan had been sold to Midland, but was still racing under the name Jordan.) On 7 December, 2005, Williams became the fourth team to sign an extension to the agreement.

On 27 March 2006, the five GPMA-backed teams (Jaguar, Honda, Ferrari, Toyota, and Renault) submitted their applications for the 2008 season. On 14 May 2006, the five GPMA-backed teams signed a Memorandum of Understanding (a letter agreeing to the terms) with the commercial rights holders (CVC/Ecclestone). This formed the basis of the next Concorde Agreement. A full Concorde Agreement was not in place for the  season, with the Memorandum and other individual teams acting as a temporary solution.

On 29 July 2008, the ten currently competing teams created the Formula One Teams Association (FOTA) to negotiate the terms of contract. After a dispute between FOTA and the FIA in the first half of 2009, a new Concorde Agreement was signed by Mosley and all of the teams except BMW Sauber. BMW Sauber had announced it was going to withdraw from Formula One at the end of the season. The new agreement provides for a continuation of the terms of the 1998 agreement. It runs until 31 December 2012.

A program of resource limits was also agreed on. Revised sporting and technical regulations for the  season were set.

 References 

 The Economist: Grand prix, grand prizes
 GrandPrix.com: Who owns what in F1 these days? 
 European Commission

Category:Formula One