There’s a very basic reason the oldest trophy in international sport continues to attract the attention of the press, the public, and the billionaires who contest it; is the unique nature of the Deed of Gift that controls it and the immensity of the challenge that creates. A perpetual ‘Challenge Cup’, the AC Deed provides an absolute prohibition against ‘considering other challenges’ until the pending event has been decided. Combined with the clause allowing the winner to set most of the rules of the competition, the anti-consideration clause is the document’s most powerful tool preventing the whoring out of the Cup to predictable commercialized interests. When you reconcile the clause with Schuyler’s stated intent of the Cup to recognize and reward advances in sailing technology and boat design, it all makes sense – the America’s Cup is not supposed to be just another sport.
Unfortunately for Louis Vuitton, Panerai, and Russell Coutts’ bank account, these clauses mean the AC will never become a reliable, consistent sporting property, and it’s a struggle that rich sailors and their lawyers have been fighting for a century. That’s why Ernesto Bertarelli tried to change the rules – to make the Cup reliable for sponsors and the public – an idea that may have originally come from Coutts in his Alinghi days – the same Coutts who has launched the latest attempt to circumvent the Deed’s language and George Schuyler’s intent.
Along with the incredibly cheesy photo from posh Garrod’s above (where the only one who looks right is the same one with decades of multi-milllion dollar sponsorship success), AC organizers released the news yesterday of a new ‘Framework’ for the next two cycles of the America’s Cup. Said framework provides schedules, boat types, and most of the important rules for any reliable competitive sporting league, and five of the six current AC teams signed the document, presumably in the room above, and likely with a ruby-and-diamond encrusted pen. Emirates Team New Zealand notably abstained, writing on Facebook that “Emirates Team New Zealand believe the future America’s Cup format should be decided by the Defender and Challenger of Record as it has historically been.”
The ‘Framework’ is eminently sensible for a two-year-cycle sports property, allowing the ACWS to immediately start up at the end of 2017 with a 2019 and 2021 AC competition. It freezes boat designs and calls for a $30-$40M budget for competitive teams. But there is one problem with it: It is invalid and unenforceable under the terms of the Deed.
The Deed of Gift provides that “…when a challenge from a Club fulfilling all the conditions required by this instrument has been received, no other challenge can be considered until the pending event has been decided…AND the said party of the second part hereby accepts the said Cup subject to the said trust, terms and conditions, and hereby covenants and agrees to…faithfully and fully see that the foregoing conditions are fully observed and complied with…”
Under laws of the State of New York (which has jurisdiction over any AC rules interpretation and enforcement) any agreement made for a future cup would likely be invalid under the Deed’s prohibition against other challenge considerations. Remember, though, that the Deed is only enforced if someone complains, so practically, this may not mean much.
Say that LRBAR beats Oracle in Bermuda. They have two choices: They can accept a ‘hip pocket challenge’ from, say, Groupama, that perfectly reflects the Framework’s guidelines, and as long as nobody cares, they’re good. Or they could accept a completely unrelated challenge with no relationship to the Guidelines from, say, Luna Rossa. In the first instance, an outsider like Luna Rossa could sue Ben for contract breach just like Larry sued Ernesto, and under settled New York Law, the court would probably invalidate any agreement made prior to the end of the current AC. Whether they would invalidate the entire challenge is another question, but typically Courts are not sympathetic to Trustees who look to benefit from violating the terms of their Deeds of Trust. If the Challenge was invalidated, all Challenges with provisions from the Framework would be similarly invalidated, leaving whoever sued the winner as the next legitimate challenger. Bring on the 130-foot ketch super-trimarans!
Alternatively, LRBAR could make a deal with Bertelli or Dalton for a completely unrelated challenge, let’s say in big monohulls. Coutts would be pissed, but if he sued to enforce the terms of the Framework Agreement, they’d laugh him right out of the courtroom – there’s simply no way to enforce an agreement that violates the terms of the Deed on its face.
Legally, this means that the Framework is useless, so why would Coutts & Co turn it into a major item of news and publicity when Oracle’s lawyers surely know all this?
We believe the Framework came about because of the difficulty the America’s Cup has been having in getting people to pay for their series. Major TV networks have laughed at Coutts’ idea of what broadcast rights are worth, major sponsors are unwilling to step up to multi-year deals, and major venues are not going to commit to anything without some reliable information about the future of the event, and Russell and Larry have been unwilling or unable to accept that their never-ending PR and organizational screw-ups have anything to do with it. Never mind the seemingly endless stream of sponsors burned by the AC. Never mind the cash flow horror stories of venue after venue. Never mind the non-existent home audience. Never mind the fact that the ACWS has been an expensive disaster of windless venues and weak competition. Nope. To Coutts and Co, all the failures are 100% because of that damned George Schuyler and his obsolete Deed.
Will this Framework assuage the fears of the few big sponsors interested in the AC for multiple cycles? Will it entice new teams to begin preparing for the next cycle? Will it gin up the very weak support that exists for the “America’s Cup Lite” that Coutts has been gradually transforming the AC into since 2010?
It could, but only for those who don’t look into what it really means – which is precisely nothing.
Here’s the NZ Herald’s take on it, and the argument is already heating up in the forums…