A summary of the America’s Cup’s litigious history: 1851 – 2013

I have just published a blogpost touching on the UK tax issues considered in the case of Sir Keith Mills & Team Origin LLP v HMRC [2017] UKFTT 378 (TC).

The Ruling is also interesting for its Appendix, which describes some of the litigious twists and turns of the America’s Cup. I think it is worth repeating in full, given that we are only two weeks away from the start of the 35th America’s Cup campaign in Bermuda:

Background

113.       In 1851 the original trophy was won by an American syndicate and, in 1857, it was renamed the America’s Cup trophy and donated to the New York Yacht Club (“NYYC”) by a Deed of Gift which created a New York law charitable trust providing for the Cup to be available for perpetual international competition. Any yacht club meeting the requirements specified in the Deed of Gift had the right to challenge the club holding the Cup.

114.       The NYYC won the Cup from 1857 to 1983 inclusive. Until 1970 there was always only one challenger, called the challenger of record. This was the default position under the Deed of Gift, and so a competition between the holder and the challenger of record was called a Deed of Gift (or DOG) match. However, for the 1970 America’s Cup, interest in challenging was so high that the NYYC decided for the first time to allow the challenger of record to organise a regatta among multiple challengers, with the winner being substituted as challenger and going on to compete against the defender in the actual America’s Cup match. From 1983 onwards, the competition between the challengers has been sponsored by Louis Vuitton and the winning challenger is awarded the Louis Vuitton Cup. In practice, the successful defender of the America’s Cup would negotiate with another yacht club to be the challenger of record, on the basis that they could expect to agree on the protocol. Except for the America’s Cup races in 1988 and 2010, the winner of the Louis Vuitton Cup has always had the right to challenge the current defender for the America’s Cup. The two exceptions were due to litigation.

115.       As to how it was decided who counted as the “first challenger”, Sir Keith explained that as soon as the winner (the new Defender) crossed the line documents would be exchanged through the Commodores with a friendly yacht club. Being a Challenger of Record gave the challenger a seat at the negotiating table. During 2007 Sir Keith’s evidence was that he had had a number of negotiations with Ernesto Bertarelli who was head of the Swiss team about RTYC being the Challenger of Record.

116.       As regards the 35th America’s cup the Defender has agreed to work with a committee made up of all the challengers and has agreed that it cannot change the rules of the AC without the agreement of the majority of the Challengers.

1988 (27th) America’s Cup: litigation

117.       The San Diego Yacht Club (“SDYC”) won the 1987 Cup. Soon afterwards, a surprise Deed of Gift challenge was made by a New Zealand syndicate called Mercury Bay Boating Club (“MBBC”). This resulted in legal proceedings, with the New York Supreme Court deciding that the MBBC’s challenge was valid, and ordering the SDYC to accept it and negotiate mutually agreeable terms for a match, or race under the default provisions of the Deed of Gift.

118.       In the event, the SDYC and the MBBC did race in a DOG match in September 1988, with the SDYC using a catamaran. The MBBC lost, but returned to court, arguing that the race was unfair. The New York Supreme Court agreed, but its decision was eventually overturned.

1992 (28th) – 2007 (32nd) America’s Cups

119.       There was no litigation in relation to the 1992, 1995, 1999, 2003 or 2007 America’s Cups: on each occasion, the protocol was agreed without controversy, the Louis Vuitton Cup regatta took place between a number of challengers, and the winner then raced against the defender for the America’s Cup. The 2003 (31st) and 2007 (32nd) Cups were won by Alinghi, racing under the colours of the Societe Nautique de Geneve (“SNG”) yacht club. Management of the 32nd Cup was handled by a company called AC Management (“ACM”). It was reported in the press that a surplus of €66.5 million had been made, which was to be divided 10% to ACM, 45% to SNG, and the balance between the remaining teams.

2010 (33rd) America’s Cup

120.       In July 2007, SNG accepted a formal challenge by CNEV, a Spanish yacht club newly formed for the purpose, for the 33rd Cup. SNG and CNEV released a protocol, including a new design of boats (AC 90), with provision for disputes to be resolved by arbitration (before the AC33 Arbitration Panel), and that once again AC Management would be the official organising body.

121.       On 20 July 2007, however, Golden Gate Yacht Club (“GGYC”), a US club, acting on behalf of BMW Oracle, began legal proceedings in the New York Supreme Court claiming that since CNEV had never run a regatta it was not qualified to be the challenger of record, and at the same time filed its own challenge, claiming to be the first club to have filed a conforming challenge, and therefore the challenger of record in place of CNEV. Despite the litigation, SNG continued to work with other teams, including TeamOrigin which had submitted a challenge through RTYC, on the protocol for the 33rd Cup. On 7 September 2007, the AC33 Arbitration Panel confirmed CNEV as the challenger of record.

122.       However, GGYC, which had not signed the contractual protocol, did not accept the Arbitration Panel’s decision, and continued with the court proceedings. On 27 November 2007, the Supreme Court ruled in favour of GGYC, ordering SNG to meet GGYC’s challenge under the default Deed of Gift terms unless they could agree on a protocol. However, they could not agree. Instead, SNG appealed against this decision to the Appellate Division of the New York Supreme Court.

123.       On 13 March 2008 the Court confirmed its order. On 29 July 2008 the Appellate Division reversed the lower court ruling, finding that CNEV was the rightful challenger of record. In the light of that ruling, SNG and CNEV released a new protocol, based on a mono hull design with a smaller crew. In November 2008, however, GGYC appealed against the Appellate Division’s decision to the New York Court of Appeals (the final appeal court). On 2 April 2009, the Court of Appeals decided in favour of GGYC, holding that a club could not qualify as a challenger if it had not previously held a regatta. GGYC then announced that it would seek to negotiate with SNG for a conventional, multichallenger Cup, and a number of yachting clubs urged them to reach agreement.

124.       However, SNG stated that it would not negotiate for a multi-challenger regatta and insisted on a default Deed of Gift match. On 14 May 2009 the court ordered races to take place in February 2010, unless the parties could agree on another date. There were further legal disputes about location and timing, finally ending in October 2009. The 33rd Cup races between BMW Oracle Racing and Alinghi eventually took place in February 2010, with BMW Oracle Racing as the winner.

2013 (34th) America’s Cup

125.       The challenger of record was Club Nautico de Roma (“CNR”). A joint press conference was held on 6 May 2010 to plan for the event, in which it was stated that the planning process would include the creation of a new class of boats in conjunction with all teams.

126.       A draft protocol was released in June 2010, but this did not include a “class rule”. When the protocol was published on 13 September 2010, the new class of boat was a wingsail catamaran. These boats proved to be so expensive that CNR and 10 other challengers withdrew; only 4 teams could afford to compete“.

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