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Formula One: Testing The Breaks At Silverstone

As we cruise into this weekend’s British Grand Prix the future of the event is in jeopardy. The British Grand Prix has been a feature of the F1 calendar since 1926 and has been held at Silverstone almost continuously since 1948. However, the circuit’s owner – the British Racing Driver’s Club (BRDC) – announced late on Tuesday night that it has triggered a break clause in its contract to host the race until 2027. If negotiations with Liberty Media, F1’s ultimate owners since January 2017, are unsuccessful then the last GP to be held at Silverstone could be as early as 2019.

When the contract was signed in 2009 between BRDC and Formula One Group, F1’s then owners, it was not without controversy; the bid was originally won by Donington Park who terminated the contract soon after due to funding difficulties. In entering the contract, BRDC agreed to pay an annual hosting fee but has been stung by the reported 5% annual fee increase which has risen from around £11.5 million in 2010 to £16.2 million for this year’s race.  There is some perception that BRDC may be using its break clause option to publicly pressure Liberty Media into re-negotiating the 5% fee increase.

The circuit is, unlike an increasing number of F1 venues, completely privately owned and so does not receive government subsidies for hosting the event (which is often viewed as an international profile-raiser and revenue booster by national authorities such as in Azerbaijan). However, the fee is still significantly lower than for some other circuits, for example the Circuit of the Americas in Austin which will reportedly pay hosting fees of almost $560 million over its 10-year contract.

There has also been reported criticism by team bosses of BRDC for investing money unwisely in developments to the track and paddock which have apparently failed to improve the F1 experience for fans and drivers alike. Whilst the exact terms of the contract are unlikely to be made public, it is to be assumed that triggering the break clause presents a more preferable solution to BRDC than defaulting on the hosting fee in future, which is likely to constitute a breach of the contract and carry significant financial penalties (not to mention severe financial difficulties for BRDC).

BRDC’s decision, coupled with the rising success of street circuits (such as Monaco, Singapore and Baku) and the lure of London as a global destination means that we could see an F1 race through Westminster sooner than previously thought, a vision fuelled by Wednesday evening’s F1 demonstration and “F1 Live” event in and around Trafalgar Square. Chase Carey, CEO of Liberty Media, has admitted that hosting a London Grand Prix in future is a possibility, but has also made clear his preference to negotiate with BRDC in private to seek a solution to keep the British GP at Silverstone beyond 2019.

Whilst a London street circuit would be undoubtedly an exciting addition to the F1 calendar, it is a huge blow to the sport (and to this weekend’s racing in particular) that Silverstone has pit- stopped early.

© Copyright 2017 Squire Patton Boggs (US) LLP

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