A commercial court judge at the Business and Property Courts of England and Wales will decide how McLaren will be compensated following Palou’s U-turn last summer. The Spanish driver, in fact, broke the contracts signed with the Woking company that he had signed to compete in the IndyCar Series and as a reserve driver for the Formula 1 team.
Legal documents filed in court by both parties have been reviewed by Motorsport.com and reveal that Palou is not contesting his breach of contract, but the extent of the damages McLaren is seeking in compensation. The reasons that pushed the Spaniard to the split are that he has “lost faith and security” in what he believed to be a promise of a future place in F1, which McLaren rejects by underlining that it is “unfounded”.
Palou had already driven cars from previous years for McLaren, had taken part in FP1 of the 2022 US GP in the rookie session and had participated in the 2023 Miami GP as the team’s reserve driver. Having not yet moved to the McLaren IndyCar team, these exits occurred as part of a mediation agreement for a previous contract dispute between the Woking company and its current IndyCar team, Chip Ganassi Racing.
In that case, heard by the American legal system, Ganassi was able to keep Palou as an IndyCar driver in his team by winning his second title in 2023. With the Ganassi case resolved, attention shifted to the controversial situation, which divides on multiple fronts. On the one hand, the plaintiffs are McLaren Indy LLC and McLaren Racing Ltd, while on the other hand are Palou himself and his American company ALPA Racing USA LLC, which manages his services as a driver.
Photo credit: McLaren
Alex Palou, McLaren testing at the Hungaroring
Palou’s legal team reveals the reasons for her split
In the written defense brief, Palou’s lawyers state that: “In 2022, believing that [la McLaren fosse] aligned with his ambition to race in Formula 1 in the medium and long term, [Palou] has entered into a series of agreements.”
However, subsequently there was a change of direction: “Afterwards, [Palou] has lost the trust and security that [McLaren] really wanted to support his ambition to race in Formula 1 and decided to continue racing with CGR [Ganassi] in the Indy Car Series”.
The defense also states that: “The real problem between the parties concerns the question of damages [Palou e la sua società] are required to pay a [McLaren] as result. [I danni di McLaren] are inadequately specified, ill-conceived in many respects, and grossly inflated.”
Another interesting aspect revealed by the company defending Palou is that his contract with Ganassi in IndyCar does not prevent him from accepting an opportunity for a Formula 1 seat elsewhere, should it clearly arise.
Photo by: Michael Potts / Motorsport Images
Alex Palou prepares to lead guests from McLaren during the Hot Laps Experience at the 2023 Miami GP.
What does McLaren ask Palou for in damages
To compensate for the breach of contract, McLaren asks Palou for compensation of 23 million dollars. The Woking house then added that this figure also includes the lost revenue and expenses for his replacement, stating that the reversal of direction by Palou led to the renegotiation of the commercial agreement with the sponsor NTT Data. An agreement that McLaren estimates at 6.9 million dollars, divided into an annual sponsor fee of just over 3 million dollars and 3.9 million dollars for appearances in three F1 races and for “sponsorship of the Indy Series Engineering Center.”
McLaren also claims it will lose $1.5 million over three years in “team support” through sponsorship from engine supplier General Motors, which believes this bonus can only come with “three full-time A-level drivers “.
In addition to the commercial deals, McLaren says it lost another $7 million in expected prizes, merchandising and sponsorship deals “as a result of its status as a two-time NTT Indy Car Series champion.”
As for F1, McLaren has provided an estimate of the money spent to have Palou run with cars from previous years: a program of 3.5 million, to which is added another 2.8 million dollars in expenses for the ” driver support”, work on the F1 simulator and other similar aspects. Ultimately, the company is seeking to recover a $400,000 signing bonus – and court costs.
The bulk of Palou’s lawyers’ response – a dozen pages of documentation – consists of disputing these claims and figures. And this is the crucial point of the case: after examining each point, a judge will decide what the amount to be reimbursed will be.
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