The America's Cup: Charting a Course through Legal Disputes

The America’s Cup, which is the world’s oldest surviving international sporting event, has entered a new era of prominence, with blue-chip sponsors, world-leading technology, and an estimated audience of 1.2 billion people.

Six hydro-foiling, hundred-million-pound yachts – which have more in common with Formula One cars than ordinary sailing boats – do battle every three to four years, with a 175-year-old trophy on the line and high-profile backing from the likes of Emirates, Prada, Louis Vuitton, INEOS, Red Bull and Pirelli.

However, the event has a longstanding history of bitter, fervent controversies which, given the recent acrimonious split between INEOS and Britain’s leading sailor, Ben Ainslie, appears set to continue.

Indeed, legal disputes have been so frequent that the competition has developed its own court: the America’s Cup Arbitration Panel.

This article will consider the America’s Cup litigious history, the workings of its Arbitration Panel, and some of the recent matters which have (and may yet) come before it.

History

The America’s Cup was gifted to the New York Yacht Club in 1851 by the owners of a boat named “America”, which had won the Cup at the “All Nations Race” hosted by the Royal Yacht Squadron in Cowes, United Kingdom.

The Cup was gifted on the terms set out in a Deed of Gift, which established how a challenge could be made to win the Cup. Subsequent Deeds of Gift were issued in 1882 and 1887 to provide more comprehensive rules, and the 1887 Deed has governed all America’s Cup racing ever since.

In summary, the first yacht club to make a valid challenge to the “Defender of the Cup” shall be the “Challenger of Record” and will be able to negotiate exclusively with the Defender of the Cup to agree a Protocol to govern the racing for the America’s Cup. In the absence of an agreement, the racing will be held according to the default rules contained in the Deed of Gift.

However, the Deed of Gift is not the clearest or most carefully drafted document, and the New York courts, which hold jurisdiction over it, have, on several occasions, been called upon to resolve disputes over its meaning.

Notably, several years of litigation followed the 1987 America’s Cup. The New York Supreme Court was first required to rule on the validity of a challenge made by Mercury Bay Yacht Club from New Zealand to the San Diego Yacht Club (the then-Defender of the Cup). The challenge was found to be valid, and an injunction was therefore issued to require San Diego to compete.

However, the matter returned to the courts after San Diego announced that it would race in a multihull catamaran, rather than the traditional (and much slower) 12-metre yacht. The courts allowed the race to proceed on this mis-matched basis and, after San Diego (unsurprisingly) emerged victorious, Mercury Bay went back to court, seeking to disqualify the result. Whilst they succeeded at first instance, the result of the race was ultimately upheld on appeal.

America’s Cup Arbitration Panel

With a view to avoiding further such litigation, the America’s Cup Arbitration Panel (“ACAP”) was established for the America’s Cup in 2000, with jurisdiction over on-shore disputes.

The ACAP has evolved in the 25 years since it was established and, as of the 2024 America’s Cup, the ACAP was a three-member panel, with the Defender of the Cup and Challenger of Record each nominating one member, and mutually agreeing on the third member, who served as Chairman.

Reflecting the bespoke nature of the arbitral system for the event, the ACAP for the 2024 America’s Cup had its seat in Auckland, was subject to the New York Convention of 1958 on the Recognition and Enforcement of Arbitral Awards, and required its three members to “possess knowledge of America’s Cup history and the Deed of Gift” as well as “good general knowledge of yacht racing and yacht clubs”.1

It had jurisdiction over all disputes (other than those concerning racing rules) between competitors, and between competitors and the event organiser, albeit not disputes between the organiser and the Defender (which is responsible for organising the event) nor between competitors and their own sailing teams.2 It was also empowered to resolve all matters of interpretation of the Protocol.

The powers of the ACAP for the 2024 edition included the right to mediate disputes, to engage independent counsel and technical experts, and to impose a broad range of penalties – from a fine, points deduction or disqualification to the suspension or expulsion of team members, or even the reduction in the number of sails permitted to be used on a boat.3

Whilst some have concerns about the secrecy of ACAP proceedings (as they are confidential until a decision is made), it is generally considered to have been a success – allowing disputes to be resolved in a time and cost-efficient manner, before a specialised tribunal.

However, the very existence of the ACAP depends upon a Protocol being agreed between the Defender of the Cup and the Challenger of Record. Unless and until such a Protocol (which provides for the jurisdiction of the ACAP) is agreed, any challenge for the America’s Cup will be governed by the Deed of Gift, which does not contain any provision for arbitration and will instead be subject to the jurisdiction of the New York courts.

Indeed, the absence of a (valid) Protocol led to prolonged litigation once again, in relation to the 2010 America’s Cup. A Protocol had been agreed between the Geneva yacht club (the Defender) and CNEV, a Spanish yacht club (the purported Challenger of Record), which included provision for any disputes to be resolved by the ACAP. However, Golden Gate Yacht Club disputed the validity of CNEV’s challenge for the Cup and commenced proceedings before the New York courts.

Although the ACAP had ruled that CNEV’s challenge was valid, the New York courts disagreed and ordered the Geneva yacht club to race Golden Gate for the Cup. In total, there were 15 separate court cases regarding the terms of the Deed of Gift in connection with the 2010 America’s Cup – everything from the identity of the Challenger of Record to the method of yacht construction to be used was determined in the courts.

Accordingly, whilst arbitration has undoubtedly delivered benefits to the America’s Cup, the fact that the ACAP may only have jurisdiction once a valid challenge has been accepted, and a Protocol agreed, means that further litigation is not out of the question.

Ainslie v INEOS

As it happens, the emerging dispute between INEOS and Ben Ainslie may be one such case.

The Challenger of Record for the 2027 America’s Cup is the Royal Yacht Squadron (“RYS”) in Cowes. In recent years, RYS has entered INEOS Britannia into the America’s Cup on its behalf. INEOS Britannia is the team supported by INEOS (which also has links to Formula 1) but is built around Ben Ainslie’s company, Athena Racing.

Given that INEOS has apparently now parted ways with Ainslie and Athena Racing – and that both parties have made clear their intent to continue preparing a boat to compete – it seems that the (presumed) Challenger of Record team has been split in two.4

Legal proceedings between the two factions seem inevitable but, given that the Protocol for the 2027 America’s Cup has yet to be agreed, it remains to be seen whether the fallout will end up before the ACAP, the courts of England or New York, or all of the foregoing.

Notably, for the 2024 America’s Cup, the Protocol expressly stated that the ACAP would not have jurisdiction over disputes between RYS and INEOS Britannia or Athena Racing.5

Recent Disputes before the ACAP

The 2024 America’s Cup saw six matters referred to the ACAP during the three-year cycle, with a noticeable variety of subject matters including merchandising regulations (see ACAP37/005), the re-allocation of boats between the competing teams (see ACAP37/002), and the concept of ‘surrogate yachts’ (see ACAP37/001 & ACAP37/003).

It also saw an application by the New York Yacht Club to be excused from competing in a Preliminary Regatta scheduled to be held in Jeddah, Saudi Arabia, due to security concerns (see ACAP37/004). In that case, the ACAP held that, under the terms of the Protocol, it was not entitled to rule on the matter, as this was a decision for the Challenger of Record, the Defender, and the Regatta Director. However, the New York Yacht Club team ultimately did compete.

On a lighter note, the ACAP was called upon to determine whether Ben Ainslie's on-air remarks to a commentator, which included his use of the words “f*****g w****r”, amounted to misconduct (see ACAP37/006). The ACAP concluded that this was not misconduct, on the basis that the expletives were used when Mr Ainslie “clearly believed the interview had been completed and he was off-air” and noted that “the words were not clearly audible”.

Conclusion

The past half-century has seen immense progress made in all aspects of the America’s Cup, as sailing’s futuristic new era demands that advancements in technology, investment and tactics are matched in the arena of dispute resolution.

The new wave of prolific investors, innovative sailors, and excited fans all want to be assured that they are funding, partaking in, and witnessing a contest which will be adjudicated fairly, expertly, and efficiently.

Through its successful implementation of a bespoke arbitration system, the America’s Cup aims to provide such guarantees while keeping the traditions of the world’s oldest international sporting contest alive. However, the archaic Deed of Gift means that drawn-out, public court battles are not necessarily a thing of the past.

Authored by 

Ben Cisneros
Associate

Jonathon Huggett
Paralegal