By Tom Rubython
UPDATE 1: Judge says airline, property firm must pay up over sponsorship deal.
Etihad Airways and
have been ordered to pay the Force India Formula One team US$4.683 million in damages as compensation for a terminated sponsor deal, in a London High Court ruling by Judge Gray.
, the title sponsors of the team, switched its sponsorship to the Ferrari team for the 2008 season citing conflict with Kingfisher, the airline owned by Force India shareholder Vijay Mallya.
The original three year deal was signed between the team and Etihad on April 16, 2007 and agreed at $5 million for 2007, $6 million for 2008 and $9 million for 2009.
The deal was brokered by Jamie Cunningham, now one of the Middle East’s leading sponsorship agents. Bonus clauses were also incorporated in the deal which meant the team could earn $100,000 for each championship point it scored and $500,000 for each place in the overall championship.
The cost of the sponsorship was split 60 per cent for Etihad and 40 per cent for
At the time, the team was called Spyker and there was no conflict. That occurred when Vijay Mallya bought a shareholding in the team the following year. Mallya was prepared to continue the agreement and not promote his airline on the cars.
However on January 27 2008, the airline terminated the deal and signed with Ferrari in a deal believed to be worth $10 million a year.
Judge Gray awarded $2.483 million for the wrongful termination of the agreement after only one year in. He awarded $500,000 for termination of the bonus for points agreement and $1.3 million for termination of the championship performance bonus agreement.
Judge Gray said the damages award would have been much higher if the team had no mitigated its loss and found replacement sponsors.
will probably have to pay its own and Force India’s legal costs which could add another $1 million to the cost. However the Judge did not immediately make that order.
An Etihad spokesperson said: "Both Etihad and
were surprised at the judgement and strongly disagree with its conclusions. We have been advised that there are strong grounds for appealing the decision and will be pressing on with an immediate appeal."