The recent America’s Cup boat change from AC62s to AC48s has been extremely controversial. Never before in the more than century and a half history of the America’s Cup has the boat class been switched in midstream writes the Editor of sailingscuttlebutt.com.
This change caused one of the best financed, most experienced teams – Luna Rossa Challenge – to pull out after spending tens of millions of US dollars. The most experienced AC team, former Cup holder and AC34 match finalist Team New Zealand, teeters on the brink.
While the change was promoted as a cost-savings matter, this commentary will go through the documents and the law regarding that change… and whether this option existed.
Question this commentary. Check it against the documents and the law governing document interpretation, which lawyers and courts call “contractual interpretation.” You can find those rules on the internet or ask your lawyer friends. If anyone claims this analysis is “flawed,” ask what the flaw is and check the documents yourself.
So was the change of boat legal? Let’s see. The documents to consider besides the Dead of Gift are the then governing Protocol (not the current one) and the then governing AC62 Class Rule (again not the current one). The applicable rules of contractual interpretation are simple:
1. In any deal you read all the documents together.
2. Specific provisions take precedence over general provisions.
3. Every provision of the combined documents must be given effect so that no provision is superfluous.
We also have to remember a couple of indisputable facts. First of all, no one has claimed that the boat change was made under Class Rule 4.1 (Amendment) of the AC62 Class Rule, which, with exceptions in 4.1 (a) (b) and (c) no one claims apply, requires unanimity. That is probably because although there are those exceptions to unanimity, the requirements of those exceptions could not be met. The claim is that the boat change was made as an amendment to the Protocol by majority vote.
The documents are governed, as is the Deed of Gift, by New York law. Protocol 1.1 (c) provides that the AC62 Class Rule means the class rule for the AC62 Yachts to be used in the main event. Protocol 1.1 (h) provides that AC62 Yacht means a yacht conforming to the AC62 Class Rule. So, according to the Protocol, AC35 will be sailed in boats conforming to the AC62 Class Rule, which can only be amended pursuant to Class Rule 4.1 by unanimous consent. The specific Class Rule 4.1 amendment provision of the AC62 Class Rule governs, not the general amendment provision of the Protocol. Every provision of the combined documents is given effect.
One of the most important provision of the Protocol is 35.2, which provides: “AC62 Class Rule: GGYC and the Challenger of Record shall publish the AC62 Class Rule prior to the start of the Entry Period.” Don’t forget that the AC62 Class Rule provides that it can only be amended by unanimous vote pursuant to Class Rule 4.1. Protocol 35.2 is a promise and representation that AC35 will be sailed in AC62’s unless amended pursuant to Class Rule 4.1.
Moreover, if the AC62 Class Rule could be changed by majority vote, any time a competitor developed a design breakthrough within the Class Rule, the other competitors could simply ban the design breakthrough by amending the class rule. Innovation would be banned – in a design competition.
The organizers of AC35 have breached their representation that AC35 would be sailed in AC62s and legally are in the wrong.
What about the fact that a majority of the challengers think the AC62 is a bad idea and too expensive for them? The answer to that in our legal system is simple: tough. Everyone made a deal and a deal’s a deal.
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