It’s no secret that sponsorship agreements advance opportunities for drivers on the path to Formula 1 racing, but they can also be a source of legal trouble for drivers and teams alike. AlphaTauri rookie Nyck de Vries is no exception to this. De Vries climbed the junior ranks in motorsport, winning the Formula 2 and Formula E championships in 2019 and 2021 respectively with support from Jeroen Schothorst, a mogul in Dutch real estate. According to their 2018 loan agreement, de Vries accepted a €250,000 loan on which he would pay 3% interest per year. In addition, the contract stated that de Vries would pay Schothorst 50% of his future earnings from all F1-related activities, a clause which would expire if de Vries failed to secure an F1 seat by 2022.
In 2022, in addition to paying interest on the principal loan, de Vries paid Schothorst €75,000 based on de Vries’ reserve driver contract with Mercedes. However, in the same season, de Vries sat in for Williams driver Alex Albon in the Italian Grand Prix and did not provide compensation to Schothorst, stating that this was not a contracted position. In reality, de Vries just happened to be in the paddock when Albon suddenly became unable to race due to appendicitis. Schothorst initiated legal proceedings in the District Court of Amsterdam, claiming that de Vries’ one-off participation in Monza was an F1-related activity that triggered the payment clause, and as such, he should be compensated as per the terms of their loan agreement. Additionally, Schothorst demanded that de Vries provide the details of his 2023 driver contract with AlphaTauri.
In a summary judgment released February 3, 2022, the District Court held that despite de Vries’ participation in Monza during the 2022 season, this activity did not trigger the payment clause because his participation was only in the capacity as a reserve driver and he did not enter a contract with Williams for stepping into the role. In finding for de Vries, the court also held that the racer had met all obligations owed to Schothorst in the context of their loan agreement and that sufficient information was provided to the lender regarding potential future racer contracts.
De Vries has since secured a full-time F1 race seat with AlphaTauri for the 2023 season – prompted in part by his stellar performance in Monza last year.
The court’s judgment as well as the parties’ loan agreement have yet to be made publicly available, so the full and complete wording of the payment and expiry clause is unknown. If I were to speculate, the contract and/or the parties’ intentions must have been sufficiently clear to the court that the payment clause would only be triggered if de Vries accepted a contracted position as an F1 driver and was not on the basis of any broad F1-related activity like stepping in as an alternate for Williams. Alternatively, I would say that it would have been a stretch for the court to exclude reserve drivers from the definition of any ‘F1-related activity’.
What’s more, in 2013 Williams signed a long-term contract with Mercedes to supply engines for the team. With the close connection between Williams and Mercedes it wouldn’t necessarily be unreasonable for Williams to look to the Mercedes reserve drivers if they needed an emergency alternate. Although the court did not reason in this way, it may be argued that de Vries’ €75,000 payment to Schothorst was in recognition of his roles as a Mercedes and Williams reserve. In this way, even if the court found the payment clause was triggered, it may have concluded that de Vries ultimately respected his obligations.
What’s also interesting from this saga are the reports stating that Schothorst initiated legal action in part because he is frustrated with the fact that de Vries secured an F1 seat for the 2023 season and not in the last year of their loan agreement. I do think it unusual that after a successful run in the junior ranks where he won multiple championships, de Vries sat on the F1 sidelines for two years before entertaining an F1 debut. At AlphaTauri’s 2023 team launch earlier this year, de Vries stated that it was a deliberate decision to not start racing in F1 sooner because he wished to invest time in other areas and keep all career opportunities open. It is unclear whether de Vries held off on contractual talks with F1 teams until the payment clause in his junior sponsorship agreement expired. However, it is also just as likely that no F1 team was willing to bet on his performance prior to 2023, and I have doubts that anyone would pass up their dream to race in F1 all because of a loan agreement clause.
In any event, the start of the 2023 Formula 1 season is just around the corner and is promising to be an exceptionally exciting year. With a record breaking campaign calendar thanks to the inaugural Las Vegas Grand Prix, and the highly anticipated fight between Ferrari and Mercedes as they battle the reigning Red Bull team, F1 fans and drivers surely have much to look forward to!