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Gladwell's Line: America's Cup enters a critical phase

by Richard Gladwell 3 Apr 00:42 PDT 3 April 2019
Several of the Late Challengers have some heavy lifting ahead before competing in the 36th America's Cup © Matt Knighton

It was a surprise to get a call mid-afternoon yesterday from a TV news reporter, asking if there was any truth in the statement that all three of the late Challengers were all pulling out of the 36th America's Cup.

When asked if they had checked first hand with the teams, the response was they hadn't done that. Given that the Dutch were hopefully sleeping soundly at the time, the chances of DutchSail giving an up to date response was unlikely.

Given Sail-World's informal chats with the Dutch and their latest media statement, a pull-out seemed most unlikely at this stage.

The Malta Challenge have a spokesman in Auckland, who is easy to contact and provided you can work with off the record comment - then it is easy to get the "direction of travel" on a particular issue.

A call to Malta Challenge not surprisingly said that they had not written an exit media release, and were awaiting confirmation or otherwise of funding.

Stars and Stripes Team USA are slightly more awkward to contact, because of time zones from NZ, but it certainly can be done. 3News reported that they understood the team was drafting a media release announcing its withdrawal. The team categorically denied that statement less than 24 hours later.

The West Coast USA team have a partially built boat and are further down the track than the other two Late Challengers. At worst they could have been resolving funding or management issues. But again that is not unusual for a commercially based team - in fact, it would be unusual for there not to be some reshaping as the team transitioned from start-up to campaign mode. The reason is simple - it is easier to get good people on board when the Challenge has some definition to it, rather than the early days which usually consist of a group of friends with a great dream and an associate with deep pockets.

While we had been told by a first hand source, based in Europe, that Malta Challenge did have some serious issues, which don't need to be aired here, it was equally true that they were the easiest Challenge to get tracking - as "all" that was required was a major cash injection into the team. The rest of the Challenge was set for take-off, and they had some very good people involved. It would be one of the big disappointments of the 36th America's Cup if Malta were not on the start line.

A couple of hours later we were able to make contact with the DutchSail team who immediately confirmed that they had not been approached by any NZ media organisations. While they didn't want to be issuing a press release on every inaccurate story appearing in the Kiwi media, they did comment overnight for publication:

"We are not giving up. We waiting for our leads to get back to us, and we feel unbelievably motivated to bring DutchSail to the next phase".

Based on that response, it didn't seem like DutchSail was one of those who were heading for the exit door of AC36.

After a few minutes of calls - it was simple enough to establish that at least two of the three teams were definitely in the America's Cup.

An hour or so later, Emirates Team New Zealand also posted a statement: "Due to today’s speculation The Defender Emirates Team New Zealand can confirm no Challenger has withdrawn from the 36th America’s Cup. The payment dates for entry fees are not time critical. The Arbitration Panel ruled that they are ineligible to race if entry fees remain unpaid, but their validity as a challenger in the meantime is not affected. The teams just need to be up to date by the time of the first race of the America’s Cup World Series in 2020. Emirates Team New Zealand has been, and remains fully supportive of encouraging the new teams into the 36th America’s Cup joining the already very well established and strong group of existing Challengers."

On this morning's online edition (NZT) of Sailing Illustrated, the very well connected Tom Ehman (San Francisco/San Diego) spoke on the situation, and wrote of the third Late Challenger, Stars and Stripes Team USA: "As to Long Beach Yacht Club's Stars+Stripes Team USA and rumors Monday that they have paused construction of their AC75 yacht in Holland, Michigan, your Ed. is reliably informed that, indeed, that is the case. However, one hears that the Club and team are determined to carry on and, at least in the near term, have the resources to do so. It is expected that the team will make and announce some mid-course corrections in the coming days, and could well emerge stronger – financially and organizationally. Again, time will tell."

Of course, the postponement of the first regatta in the America's Cup World Series from October 2019 to April 2020, works for Stars and Stripes Team USA, who can slow down or suspend the building effort, do more design work, and maybe use the time to reshape the Challenge, if need be.

Less than 24 hours later two of the three America's Cup Challengers and the Defender issued statements denying they were withdrawing from the regatta.

History does repeat

A look at this time in the recent history of the America's Cup shows that abrupt exits from the Cup for Challengers, are not uncommon.

Four years ago, in April 2015, the current (and then) Challenger of Record Luna Rossa pulled out after the America's Cup Class was switched from the AC62 to the AC50 with the unanimous consent of all entered teams. The team at that time was fully functional with 80 people engaged.

At the same time Emirates Team New Zealand came under real financial pressure with the well-publicised withdrawal of the 2017 America's Cup Qualifiers from Auckland. The matter went to the Arbitration Panel for the 2017 America's Cup, and ETNZ received a substantial settlement. The team struggled financially and at the end of October 2015 had the media release drafted announcing their withdrawal. However, after an overnight discussion and capital injection, the team was able to survive - and 18 months later went on to win the 2017 America's Cup.

It should not be forgotten that all through the very difficult six month period from April to October 2015, that the Kiwi media, in particular, went hard after Emirates Team New Zealand with some very negative media coverage, very little of which was based in fact.

In fact, the targeting of Team New Zealand began right from the time they were unsuccessful in the 2013 America's Cup and indeed going right back to the aftermath of the 2003 Defence.

In July 2014 the then Challenger of Record, Australia's Hamilton Island Yacht Club pulled out at the point of having to pay their entry fee for the 35th America's Cup.

Back in May 2011, the initial Challenger of Record, Club Nautico di Roma represented by Mascalzone Latino pulled out - like HIYC the Protocol they had just negotiated with Golden Gate yacht Club, proved to be too expensive for them to continue.

Undermining America's Cup teams at this stage of the competition, and indeed right through the regatta, is not unusual. Whether that is a legitimate part of the America's Cup game is another matter.

If the Racing Rules of Sailing had been in force for the current America's Cup, then off the water actions by teams against others could be governed under the Misconduct provisions, for which the penalties are substantial and now cover both teams and individuals associated with teams.

Previously Golden Gate Yacht Club put rules in their Protocols covering the 34th and 35th America's Cup to prevent teams or individuals making adverse public comment about the America's Cup event, but not between the teams. That was the so-called "Dalton Clause".

In this America's Cup cycle, Emirates Team New Zealand was critical of the New York Yacht Club after the publication of recent decisions from the Arbitration Panel.

In a subsequently withdrawn media statement referring to the New York Yacht Club's team continuing with its complaint about imperfections in the Late Challenges accepted by the Royal New Zealand Yacht Squadron, Emirates Team New Zealand said: "This anti-competitive action has caused further delays and uncertainty for the teams and frustrated the Challenger of Record and the Defender who have been working together in the best interests of the event."

While lodging complaints with the Arbitration Panel is quite legitimate, it can also have an adverse effect on Challengers. Particularly affected are commercially based teams who are trying to approach sponsors and backers.

Would be sponsors/backers can run quick, usually informal, checks on the team and which may throw up some minor issue in the context of the America's Cup rules, which appears to be significant to someone new to the event, and who doesn't understand the cut and thrust of America's Cup competition.

Erring on the side of caution, the new sponsor or backer's usual response is to back out and proceed no further, in which case those who have created the uncertainty have achieved their objective.

Equally, planting stories in the mainstream or social media with the same intent of stymying new challengers is certainly not in the best interests of the America's Cup.

For all its history to the contrary, the America's Cup is intended to be "a perpetual Challenge Cup for friendly competition between foreign countries." In its latest Decision, the Arbitration Panel for the 2021 America's Cup noted that point as being a fundamental principle of the Deed of Gift.

They also added that "It is not enough for another competitor to say it will suffer prejudice by having another competitor etc.".

ETNZ design package changes Cup timelines

By offering a design package to the Late Challengers, they can reduce their project timeline, which are much quicker than for the earlier entered teams who have chosen to start with a design blank.

Even more straight forward for the AC75 is the fact that while the hull shape is important, at this stage, it is not as critical as with a displacement boats. On the Ac75 the hull is airborne for much of the time. Further, the foiling arms and controlling mechanisms are also supplied parts, meaning that one option is just to get a standard ETNZ hull and the supplied control systems will fit.

The rest of the tasks are more difficult, not the least of which is setting up a building facility in the country of the Challenger, and setting up one or two sailing bases.

The Late Challenges have to pony up with $4million in Entry Fees and Performance Bonds.

If they buy a design package, they are up for another $5million. That checklist means Late Challengers need to come up with close to $10million inside a couple of months - which is a daunting prospect for any new team - and particularly one which is heavily reliant on commercial sponsorship. They will struggle in this phase as many have in the past. The two teams which haven't started boats need to do so by May or early June at the latest to hit a launch date of February 2020 ready to race in April 2020.

Of course rattling the financial bars of the Late Challengers' cages also has a consequence, probably intended, that the Defender, Emirates Team New Zealand stands to be out of pocket for one or more design fees.

Potentially that creates a hole in ETNZ's budgets of $15million - which is not easily replaced - even if you are the America's Cup Defender, and can offer sponsors the certainty of TV exposure in the America's Cup Match.

The Challengers, of course, stand to lose as well, as 73.75% of the Entry Fees go to the Regatta Fund to help pay the costs of the ACWS and Challenger Selection Series. The three Super teams pay a total of $6million in Entry Fees. The three Late Challengers pay a total of $9million in Entry and Late Entry Fees. With just three Super Teams challenging, the Regatta Fund has $4.425million and with all three Late Challengers in, the Regatta fund sits at over $11million.

Much is made of the investment by Auckland Council of $114million into the America's Cup base construction. But that commentary forgets that the old Auckland City Council, in two separate Decisions from the Supreme Court, was held to be liable for the clean-up and decontamination cost of the fuel and hazardous substances facility, on the sites for the America's Cup to which the Court attached an estimate of $50million for each site. A third site's rectification was settled out of Court.

The point is that the Council was up for a spend of at least at least $100-150 million - America's Cup bases or not.

Maybe before dreaming up the next headline, or reaching for a protest form, spare a thought for a few seconds on the fact that the America's Cup has not recovered from the Dark Decade of being in the New York Supreme Court, and the games that were played subsequently.

Auckland represents a new start for the Cup, with six Challenges and massively revamped waterfront. With the current number of challengers - the America's Cup is returning to back to its traditions - in the hands of people and groups who understand the event for what it is, what the donor intended, and have the Cup's best interests at heart.

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