How a cost cap breach could decide the F1 world championship

According to the FIA financial regulations, that is a potential outcome should a team breach the cost cap limit, as several expect to.

However, no one knows which penalties from a list of possible sanctions outlined in the rules are likely to be applied, given that there is no precedent.

Those rules contain a long list of breaches, mostly related to teams not reporting their spending accurately or on time, or attempting to pull the wool over the eyes of the Cost Cap Administration [CCA], the body responsible for monitoring adherence to them.

On Tuesday we heard about the first such offence, albeit a minor one, when Williams was fined $25,000 for not getting its 2021 paperwork filed by the deadline of 31st March.

However, the most important sections of the financial regulations relate to simple cases of spending more than the limit.

Such breaches will be referred to the Cost Cap Adjudication Panel [CCAP], which is a group of six to 12 judges proposed by the FIA and by the teams. Any decision they make can subsequently be challenged by the team concerned, or other parties, in the International Court of Appeal.

Overspending, whether in the numbers voluntarily declared by a team up front, or those discovered later via an investigation, falls into two categories.

There’s a simple split at 5% of the cap: a breach below that is regarded as a “minor overspend”, while anything above 5% is a “material overspend”. The latter case is taken far more seriously.

That 5% number is not insignificant. Teams are currently aiming for $140m plus $1.2m for the 22nd race, making for a 2022 total of $141.2m. Thus a 5% breach represents extra spending of around $7m – which equates to a huge amount of R&D, potentially enough to make the difference between winning or losing the title.

The rules note that in the event of an overspend below 5% the CCAP “may impose a financial penalty…