Arbitration Ambiguity

What Does  Arbitration Decision 04 Mean?

COR Defends American Magic After Defender Takes a Dig at NYYC

America's Cup Arbitration Panel Decision Case 04

Click the image to download Arbitration decision

Why Bother Diving Into All this Detail?

Good question. Sadly, this is the most exciting news about the 2021 America's Cup right now (March 2019). The AC75 yachts would be exciting, but they are delayed by structural design problems with the supplied equipment foil arms. And, I'm a geek for everything about the America's Cup, including the details behind the skullduggery and chicanery. 

What's This All About?

It looks like some or all of the three late challengers - Malta Altus Challenge, Stars & Stripes and DutchSail - did not pay their Entry Fee, Late Entry Fee and Performance Bond by the original deadlines in the Protocol. The other challengers objected, but only Challenger of Record Luna Rossa has any power to accept or veto changes to the Protocol. 

The Arbitration Panel published a decision that takes quite a bit of work to decode. ETNZ published a press release that leaves questions unanswered . COR/D (ETNZ and Luna Rossa) published a Protocol Amendment but forgot to specify the penalty for breach. 

Challenger of Record Luna Rossa settled their objection when they and Defender Emirates Team New Zealand  amended the Protocol to extend the time for paying the USD 1 million Late Entry Fee and the USD 1 million Performance Bond. Confusingly, the amendment said nothing about extending the time to pay the regular Entry Fee of USD 2 million.  Download the Protocol here and the Amendment here.

Challenger New York Yacht Club American Magic  has no vote or veto for Protocol changes, so they requested a ruling from the Arbitration Panel. The Arbitration Panel's decision clarifies some issues but raises other questions - see below.

Duelling Press Releases  

Defender ETNZ unfairly criticised NYYC... 

... for taking the only avenue open to them - requesting a decision from the Arbitration Panel.

America's Cup 2021 Auckland Arbitration Decison 04 press release

Click the image to see original article on America's Cup website.

Two hours later, Luna Rossa defended NYYC ...

... with their own press release:

America's Cup 2021 Auckland - Arbitration Case 04 Luna Rossa

Click the image to see original article on America's Cup website.

ETNZ has "concerns" about Malta Altus Challenge

Notice that in their press release, ETNZ raised concerns about whether Malta Altus Challenge will continue, but they gave no plausible reasons for their concern, citing only the delay, which would have also affected Stars & Stripes and DutchSail.

Where the Arbitration Panel Made Things Confusing

In good lawyerly fashion, the Arbitration Panel's document has a "Discussion" section and a "Decision and Orders" section. Think of this like a protest in racing: the "Discussion" section is like the fact finding and deciding which rules apply; the "Decision and Orders" is like the protest committee's ruling.

  • In the Discussion section, paragraph 14 says: 
    "Article 7.7 provides that "A Competitor shall pay the Entry Fee and provide the Performance Bond in full as a condition precedent to its eligibility and racing."  In the Panel's view this means that payment of Entry Fees and provision of a Performance Bond is a condition precedent (sic) to being entitled to race in the America's Cup, not to be accepted as a Challenger.  As a result, MAC, Stars & Stripes, and SteamOcean BV  will be eligible to race in the America's Cup if they comply with the Protocol, including with the provisions of Protocol Amendment 03 regarding in particular the amended dates of the Late Entry Fee Payment and provision of the Performance Bond." (Emphasis mine).

    This is the Panel's view, not their decision. When they talk about "the America's Cup," they must mean "AC36" which is a defined term in the Protocol, and includes all the AC World Series, the Christmas Regatta, the Challenger Selection Series and the Match. 

Here's the Arbitration Panel ambiguity:  

  • The word "racing" is used in Article 7.7 of the Protocol but is not part of the definitions in Article 58. So, according to Protocol Article 58, the meaning of "racing" is determined by reference to the Oxford English Dictionary. The Panel must intend that "racing" includes the "Preliminary Regattas" which are defined in Protocol Article 58. Interpreting "racing" to include the Preliminary Regattas would be consistent with the OED definition of "racing."
  • Presumably, the Panel's decision is fully expressed in the Decision and Orders section, paragraph 41:  
  •  The Decision and Orders section, paragraph 41 says: "The arrangements for the Entry Fee, Late Entry Fee Payment and Performance Bond as agreed between RNZYS and COR36 and as set out in Protocol Amendment 03 are valid." (Emphasis mine) 
    But Amendment 03 is silent on the date for paying the "Entry Fee"  (2x $1M). Were dates agreed for these two payments, but not published? Did the late challengers pay these fees?

And, now it's the Defender's turn to introduce ambiguity:

  • The AC website article announcing the Panel's decision in Case 04 says:  "The Panel also found that the payment of entry fees is a condition to their being able to race in the America’s Cup not a condition of their being an accepted Challenger meaning that Entry fees have only to be paid before the first race of the competition."

    The Defender seems to mean AC36 when they mention "the America's Cup." They seem also to mean that the "first race of the competition" is the first race in the Preliminary Regattas

More Ambiguity: What's the "Or Else?"

We still don't know. 

Look again at what the Arbitration Panel wrote in their Decision, paragraph 41, above. They refer to Protocol Amendment 03, which does not specify any penalty for non-compliance. Which means that if any of the three late challengers does not meet the deadlines, the matter goes back to the Arbitration Panel under Protocol Article 53.10:  "... the Panel shall determine and impose such penalty as it considers appropriate..."   
Click here: CupExperience Newsletter, Issue 88, 15 February 2019 for more info.

How did COR/D overlook this? Why did they not specify a penalty for breach of the amended Articles 7.1c) and 7.2 when they wrote Amendment 03  ??  

It ain't over 'til it's over...    Stay tuned!