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Cup competition continues in courtroom

Alinghi’s head is accused by challengers of manipulating the next Cup’s management

Alinghi’s head is accused by challengers of manipulating the next Cup’s management

After one of the most exciting America’s Cup regattas ever, winner Alinghi and its billionaire CEO Ernesto Bertarelli have plunged the event into controversy with a move to take control of the Cup’s management.

Critics say the Swiss syndicate has barred challengers from helping shape the design rule for a new class of 90-foot raceboat it has proposed for the 33rd Cup and from having any input in running the challenger or defender series, managing the event or choosing race officials. The 11 challengers who raced in Valencia, Spain, this summer were represented on a Challenger’s Commission that advocated for their interests and had significant input in decisions about the regatta.

Rival billionaire yachtsman Larry Ellison, the American whose BMW Oracle Racing syndicate raced — and lost — in the 32nd Cup challenger series, has bridled at Bertarelli’s strong-manager approach to organizing the next event. In a July 20 suit filed in Supreme Court in New York City, the Golden Gate Yacht Club (GGYC) — BMW Oracle’s home club — alleges that Bertarelli’s club, Société Nautique de Genève (SNG), orchestrated events by arranging a challenge by Club Nautica Español de Vela (CNEV), a Spanish club that was created just a few days before the challenge, making that club challenger of record representing all the challengers for the 33rd Cup. The suit also alleges that SNG got the club to agree to a protocol that puts virtually all decision-making and management into the hands of SNG and its management company, America’s Cup Management (ACM).

“SNG used CNEV as a fabricated challenger to engineer a match protocol in which virtually all challenger rights are eliminated and total control of the event and its rules are granted to SNG, altering the very nature of the competition and giving unprecedented and unfair advantages to SNG,” the suit says.

Responding to the suit at a July 25 press briefing in Valencia, Bertarelli announced that Valencia will be the Cup venue again in 2009 and vowed to fight Ellison’s court challenge. “Honestly, I will defend fiercely and with all my energy even though it is an unfortunate situation and unnecessary,” he said. Ellison had issued his own challenge to race the next Cup in 90-foot multihulls. “Team Alinghi is not interested in Larry Ellison’s multihull race,” Bertarelli said. “We’re not lawyers. We’re sailors. We’re not corporate raiders. We like to go sailing.”

Meanwhile, responding to the controversy and to what it says is growing commercialization of the Cup under Bertarelli’s leadership, the French design house Louis Vuitton announced July 6 it was withdrawing from the event after a 25-year sponsorship of the challenger series. “Louis Vuitton have decided not to sponsor the next challenger trials but will carefully observe the future evolution of the event,” the company says in a statement. “The new rules of the America’s Cup imply a more commercial approach, and the protocol is already disputed by some teams. In addition, there is a risk of a significant reduction in the number of teams taking part.”

Bertarelli said at the press briefing that so far four teams had issued challenges: Desafio Espanol, representing CNEV; the South African syndicate Shosholoza, representing the Royal Cape Yacht Club; Team New Zealand, the challenger series winner who faced off with Alinghi in the 32nd Cup, representing the Royal New Zealand Yacht Squadron; and a British newcomer, Teamorigin, flying the flag of the Royal Thames Yacht Club. (Since the press briefing, United Internet Team Germany announced its intent to again challenge.) GGYC argues in its complaint that CNEV is ineligible to be challenger of record because it isn’t a bona fide yacht club under the terms of the 1887 Deed of Gift that governs the America’s Cup. The Deed of Gift says a challenge must be made by a club that runs an annual regatta on an ocean course on the sea or an arm of the sea. The suit alleges that the closest CNEV has come to organizing a regatta is “one sham annual regatta for children” as part of a sail-training session.

The suit also says the protocol eliminates any give-and-take between the defender and challengers on how the next Cup will be run by giving ACM sole authority to accept or reject a challenge, appoint the race and measurement committees and umpires, and issue rules for a new class of 90-foot America’s Cup yacht. It also alleges that the protocol leaves challengers as little as 18 months to prepare, finance, design and build a boat under the new design rule and that it allows the defender — for the first time — to race in the challenger series. “SNG has eliminated the opportunity for a fair and equitable competition,” the suit says. “Only SNG can begin to plan its campaign and design its yachts, while other competitors must sit and wait” for the new design rule and specifics of how the next Cup will be run.

The California club asks the court to declare the Spanish club’s challenge void and to accept a challenge issued by GGYC July 11. That challenge gives Bertarelli and SNG a choice that really isn’t a choice. The Deed of Gift says a defender and challengers either can race under default rules stipulated in the deed or negotiate mutually agreeable rules. Under the default rules, the Cup series brings just one challenger to the fray, pits that challenger against the defender in a three-race series, and lets defender and challenger race the boat of their choice. Ellison already has said his choice is a 90-foot catamaran, and he has given Bertarelli the 10 months’ notice required under the deed to design and build his own catamaran. Ellison’s choice of dates for the regatta are July 4, 6 and 8, 2008. Bertarelli’s only other option under this challenge is to negotiate other mutually acceptable terms with Ellison and the GGYC, which would act as challenger of record and represent other challengers in these negotiations.

Clearly the suit is a shot across Bertarelli’s bow warning that the next Cup could turn out like the 1988 regatta, when Kiwi Michael Fay issued a challenge to Dennis Conner under the Deed of Gift’s default clause and said he was going to race a 110-foot monohull that was already under construction. Forced to respond to that challenge on 10 months’ notice, Conner built a 60-foot catamaran and — in a lopsided contest — beat Fay’s monohull 2-0. The debacle led to the development of the America’s Cup Class yacht that, though refined over the years, has been the steed of choice ever since.

The sparring is nothing new to the America’s Cup, says Tom Whidden, a 27-year Cup veteran who was a member of Conner’s afterguard in 1988. “There always has been a lot of intrigue, a lot of controversy surrounding the Cup,” he says. “It gets good press. It gets good ink.”

Whidden, who had talked with Bertarelli about the 33rd Cup protocol, says he doesn’t think the billionaire businessman is trying to gain an outrageous advantage over the challengers with this new protocol, though Cup defenders do always have the upper hand by virtue of their status as most recent winner. “It has always been the golden rule that he who holds the gold rules,” says Whidden. But he thinks Bertarelli truly believes that a strong, centralized management structure — similar to the one that has made Formula One auto racing so successful in Europe — is good for the future of the Cup.

“He definitely wants to do what’s right for the Cup,” Whidden says. However, the fact is many of the challengers — perhaps a majority — don’t like the new protocol, he says. The main issues: cutting challengers out of the decision-making and introducing an all-new 90-foot class. Whidden says challengers who are new to the Cup are likely to be especially concerned about the new class because of the cost and difficulty of developing a yacht to a new rule in time for the next Cup.

Whidden says, too, that challengers have chafed under the imperial style of Bertarelli’s ACM. And the use of a compliant Spanish club to do an end run around Ellison? Whidden characterized the stratagem as “questionable,” but says that Bertarelli’s innovative and businesslike approach to the 32nd Cup — stirring up interest with 14 pre-Cup regattas and creating a $637 million village and marina in Valencia as a tourist destination — delivered one of the most exciting and fun events in years. “He does have a track record,” Whidden says. “He put on a great event.”

Whidden agrees with Bertarelli that it’s time for a bigger, more exciting Cup yacht, one that is nothing short of spectacular. “The calls for progress are a good idea,” he says. “I think that is inevitable.” Yet Whidden says if Bertarelli “really does have the best interests of the Cup at heart,” he will open up the decision-making to broader representation.

At the press conference, Bertarelli said the next Cup will be between May and July 2009, with two pre-regattas — one in Valencia and the other in another European city — in 2008. The pre-

regattas will be raced in existing America’s Cup Class (version 5) boats, and the competition, event and yacht design rules will be published Oct. 31.

He deflected some of the criticism of the protocol, inviting challengers to consult with ACM in September about the new design rule and assuring that race officials and umpires would be independent. He said teams will be able to build two boats but put only one on the water at any time to reduce the cost of testing and put teams that can’t afford two boats at less of a disadvantage. None of the new boats will race against each other until the challenger series. Alinghi will race in that series — but not the finals — to test its boat against like vessels but only will stay in the challenger racing so long as it is unbeaten.

Spanish officials say the venue agreement requires them to kick in $144 million to upgrade the village and marina, and support the event.

The day before Bertarelli’s press conference, Ellison announced that his new CEO and team leader will be Russell Coutts, who hasn’t lost a race in three Cup regattas but was fired from Alinghi during the last Cup in a dispute with Bertarelli. While introducing Coutts, Ellison offered the bottom line in his dispute with Bertarelli: establish a committee of challengers and Alinghi to mutually agree on a yacht design rule, let challengers and defender together appoint mutually agreeable race officials and umpires, allow any legitimate yacht club to mount a challenge, and set up a “more equitable” Cup revenue-sharing system to enable more countries to participate.

Bertarelli has referred the dispute with Ellison to an independent America’s Cup adjudication panel. “It seems like having failed to win on the water twice and barely finishing fifth in the last competition, Oracle Racing has decided to bring the dispute into court hoping to win what they were not able to do on the water,” Bertarelli said. “This is a great disappointment to Alinghi and a great disappointment to Société Nautique de Genève.” He said the suit is creating uncertainty, scaring off sponsors, and damaging the America’s Cup brand. “There’s one thing for sure,” he said of the lawsuit. “Everybody loses.”