ESPN explains how a budget cap breach penalty will be decided

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ESPN takes a look at the types of penalties that could be handed out for possible breaches of the 2021 budget cap, and how they would be decided.

On Wednesday, the FIA is expected to announce the official results of their assessment of the 2021 financial data submitted by all Formula 1 teams.

Ahead of the official announcement, ESPN’s F1 Editor Laurence Edmondson took a look at what penalties are available.

“[The penalty] depends on how much teams have overspent,” Edmondson wrote.

“The regulations map out two types of breach: ‘minor’ and ‘material’ and they come with slightly different penalties.

“An overspend of less than five percent ($7.25 million for 2021) constitutes a ‘minor’ breach, whereas an overspend of over five percent is a ‘material’ breach.

“The penalties for each are listed in the financial regulations and include a public reprimand, a deduction in points (both for constructors and drivers), exclusion or suspension from stages of the championship, limitations on the ability to conduct aerodynamic testing in the future and a reduction in the cost cap for the following year.

“However, ‘material’ sporting penalties also include the possibility of exclusion and suspension from championships.”

Edmondson then examined the procedure the FIA and the teams will be going through to decide on a penalty, if a breach is detected.

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“If it is a minor breach then the team in question can enter a ‘accepted breach agreement’ with the FIA’s cost cap administration.

“Essentially, the FIA would suggest a penalty to the team, which it in turn it would have to accept and comply with.

“The details of the agreement would be made public in the interests of transparency, but omit any confidential information relating to the team’s account.

“If a material breach is discovered or the team does not agree with the terms of an accepted breach agreement, the sanctioning process gets passed on to cost cap adjudication panel.

“The panel is made up of between six and 12 judges, who are voted into their positions by the FIA general assembly.

“The judges would likely come from legal and accounting backgrounds and can be nominated by either FIA sport members or a group of five F1 teams in joint support of a candidate.

“Decisions made by the cost cap adjudication panel can be appealed at the FIA’s International Court of Appeal, meaning a definitive outcome could take weeks or even months if it is contested,” Edmondson concluded.

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