
Concorde Agreement

The Concorde Agreement is a contract between the Fédération Internationale de l'Automobile (FIA), the Formula One teams and the Formula One Group which dictates the terms by which the teams compete in races and how the television revenues and prize money is divided. There have in fact been eight separate Concorde Agreements, all of whose terms were kept strictly secret: The first in 1981, others in 1987, 1992, 1997, 1998, 2009, 2013 and the current agreement for 2021. However, the secrecy was broken by noted racing journalist Forrest Bond when the 120+ page 1997 Concorde Agreement was published at the end of 2005 by RaceFax.
The effect of the agreements is to encourage professionalism and to increase the commercial success of Formula One. The most important factor in achieving this was the obligation of the teams to participate in every race, hence making the sport more reliable for broadcasters who were expected to invest heavily to acquire television broadcast rights. In return the teams were guaranteed a percentage of the sport's commercial revenue.
First Concorde Agreement (1981).
In 1979, the Commission Sportive Internationale, an organization subordinate to the FIA which was at that time the rule-making body for Formula One, was dissolved and replaced by the Fédération Internationale du Sport Automobile, or FISA, which would serve the same function. FISA clashed repeatedly with the Formula One Constructors Association (FOCA), which represented the teams' interests. FOCA's chief executive at the time was Bernie Ecclestone and his legal advisor was Max Mosley, while the president of FISA was Jean Marie Balestre.
The two organizations' disagreements, which came to be known as the FISA–FOCA war, resulted in several races being cancelled. Goodyear threatened to withdraw entirely from Formula One, an event which would have been commercially disastrous for the sport, so Ecclestone organized a meeting of team managers, Balestre, and other FISA representatives at the offices of the FIA in the Place de la Concorde, Paris, France. On 19 January 1981, after thirteen straight hours of negotiation, all parties present signed the first Concorde Agreement, named after the plaza in Paris where the discussions took place.
The contract's terms remain largely confidential, though its known stipulations required the signatory teams to appear and compete in every race and guaranteed their right to do so in order to assure the sport's newly acquired television public that they would have a race to watch. Also, perhaps most importantly, the agreement granted FOCA the right to televise Formula One races — this right was "leased" to Formula One Promotions and Administration, a company established and owned by Bernie Ecclestone. Another important element was the stability in rules, described as protecting the teams from "the whims of the governing body".
It expired on 31 December 1987.
Second Concorde Agreement (1987).
The second Concorde Agreement governed the to seasons inclusive.
Third Concorde Agreement (1992).
The third Concorde Agreement covered the to 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 provide an annual payment. McLaren, Williams and Tyrrell protested by rejecting the proposed Concorde Agreement (negotiations for which started as early as 1993). Ken Tyrrell in particular was enraged by the fact that Ecclestone, as President of FOCA had negotiated the transfer of the rights from the organization to his own company. Tyrrell also objected to the addendum to the Agreement being secret, arguing that secrecy surrounding the agreement benefited only Ecclestone (by weakening the bargaining power of the other parties).
The three teams refused to sign the proposed Concorde Agreement, initially with the support of the remaining teams. However, 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).
By taking a stand against the actions of Bernie Ecclestone, the FIA and the wider commercial aspects of Formula One, McLaren, Williams and Tyrrell lost both influence in the sport and income which they would have received as signatories. A compromise was reached and on 27 August 1998, the 1998 Concorde Agreement was signed which accommodated the three teams and which expired on 31 December 2007.
Sixth Concorde Agreement (2009).
On 7 December 2004, at a meeting attended by the bosses of all the teams but Ferrari, Ecclestone offered a payout of £260,000,000 over three years in return for unanimous renewal of the Concorde Agreement, which would guarantee the continuation of Formula One in its present form at least until the expiration of that contract.
On 19 January 2005, Ferrari announced that it had signed an extension to the previous agreement to expire on 31 December 2012. On 18 July 2005, Red Bull also signed an extension, as did Jordan/Midland two days later. On 7 December 2005, Williams became the fourth team to sign an extension to the agreement.
On 27 March 2006, the five Grand Prix Manufacturers Association-backed teams - BMW Sauber, Renault, Honda, McLaren and Toyota - submitted their applications for the 2008 season, agreeing to stay in the sport until 2012. On 14 May 2006, the five GPMA-backed teams signed a memorandum of understanding with the commercial rightsholders (CVC/Ecclestone) which formed the basis of the next Concorde Agreement. As such, a full Concorde Agreement was not in place for the season, with the Memorandum, extensions and agreements with the other individual teams acting as a stop-gap 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, although Sauber, in transition as majority owner of BMW, had announced, shortly beforehand, its intention of withdrawing from the sport at the end of the season, so waited until a controlling stake of the team was returned to Peter Sauber before signing. The new agreement provides for a continuation of the terms of the 1998 agreement, and runs until 31 December 2012. At the same meeting of the FIA World Motor Sport Council, a programme of resource restriction was also agreed upon, as were a revised set of sporting and technical regulations for the season.
Seventh Concorde Agreement (2013).
After an extended period of negotiations, a new Concorde Agreement was signed in July 2013 and entered force on 27 September 2013. It expires on 31 December 2020.
Eighth Concorde Agreement (2021).
Negotiations over the terms to replace the 2013 agreement began as part of wider discussions over the future of the sport in 2017, however a deadline to reach a deal was extended until 31 October 2019. The Agreement was reported to be nearing completion in January 2020., however was ultimately delayed due to the COVID-19 pandemic. During the 70th Anniversary Grand Prix weekend, Mercedes team principal Toto Wolff declared his dissatisfaction with the terms of the new agreement, which was to introduce a budget cap from the season and change the prize money distribution. Wolff believed that his team would be affected most negatively. In response, the deadline for signing the agreement, previously set for 12 August, was moved back a week. However, after discussions with Chase Carey, Wolff changed stance and declared his willingness to sign the new agreement. The new Concorde Agreement seeks to protect the value of the incumbent teams, by requiring new entrants to pay 200 million dollars, shared equally among 10 existing teams, in exchange for having the right of revenue share on its first year of competition. Previously, new entries only have the prize only from its second year of competition.
On 18 August 2020, Ferrari, McLaren, and Williams announced that they had signed the new Concorde Agreement, whilst the following day Formula One announced that the other teams had also signed the agreement. The new agreement, which is the first to be made under new owners Liberty Media, will cover the to seasons, and will come into force on 1 January 2021.