James Farmer

LEGAL COMMENTARY

America's Cup - Just Do It and Positivity

Monday, September 20, 2021

September 17 was the drop dead date by which, according to previous statements emanating from Team New Zealand, the venue for the next Defence of the America’s Cup (AC37) from the short list chosen of Cork, Valencia and Jeddah would – indeed must – be announced.  Well, September 17 has been and gone and it seems it wasn’t a drop dead date after all.  According to news reports (but not yet on its web site, though on that of RNZYS) Team NZ has decided on a delay, for an unspecified period.  That may be because the Irish Government has said that they would need 6 months to undertake due diligence on the Event.  And just yesterday, a report from the Irish Business Post suggests that a new analysis, just completed by the Irish Department of Tourism and Sport, has found deficiencies in EY’s original 150 million euros cost estimate for infrastructure, holding the Event and payment of a host fee to Team NZ and that a more realistic figure is 400 million euros.  

The TNZ spin on the deferment decision is that “the process had been complicated by the difficulties presented by the global Covid pandemic that had made it impossible for team members to visit the venue options.”  But all is not lost.  “With a fresh ballot for MIQ places opening up next week”, it is said, “Team New Zealand will apply for positions there and look to get key personnel on the ground in Europe and Saudi Arabia”, likely it is further said to be the team’s COO and internal legal advisor.

Even in a media world where fact and fiction are often confused, the notion that a foreign venue is viable given more time lacks credulity.  The Irish suggestion has been subjected to increasing political and public opposition and the latest costings referred to above surely sound the death knell to Cork as a venue.  Valencia has publicly withdrawn from the process.  The late off-course substitute of Barcelona is described by my Spanish America’s Cup contacts as “fake news”.  

And so back to Jeddah?   Really!   My last column pointed out the unacceptability of Jeddah to this country, which has a proud human rights and gender equity record and that finds terrorism abhorrent. So too will other teams (certainly those from the United States) and their sponsors.  

The reality of Team NZ concluding a deal with a foreign City for the hosting of AC37 is that, as one report put it: the Emperor has no Clothes.   As Heather du Plessis-Allan said on Newstalk ZB last Friday: “It looks like Grant Dalton might just need New Zealand after all.  He’s played such a big game with this, rejecting the government package to keep it here because he didn’t think it was enough, and just winding people up with a perceived sense of ingratitude for all the millions we’ve ploughed into getting Auckland City ready for the last event.”

Dalton’s position, when he addressed the members of the RNZYS back in June, is that unless he can chase the big bucks off-shore (assuming that they exist), we will lose the Cup if it is held in Auckland.  He came back to this theme on Friday:  “Those who can’t remember the past are condemned to repeat it and in 2003 in this country the America’s Cup – a couple of the guys were involved then, it was before my time – but it was a disaster, and we have [no] interest in repeating that sort of disaster with an underfunded, hobbled team” (Radio New Zealand. 17 September 2021).

Hmm… A couple of points by way of rejoinder.  There is no suggestion that TNZ was underfunded in 2003; the issue was a radically designed boat with an ultra-light rig that lacked full testing and development.  Nor was TNZ underfunded in San Francisco in 2013 when it suffered the humiliation of losing when ahead 8-1 on match point.  It would seem that Dalton has failed to remember that particular “disaster” in his own past, even though he was a major contributor to it.   Nor was it underfunded when it successfully and superbly defended the Cup in Auckland this year.

So where to now if, leaving aside the spin, there is no credible or acceptable foreign host city on offer.  The answer is to be found in the authoritative English Rule 69 blog written by Magnus Wheatley, regarded as one of the very top America’s Cup journalists.  In two postings written in the last week (“Just do it” and “Positivity”), he argues: “Auckland was always the right choice and difficult, seemingly impossible as it is to get over the line, the case is immensely strong.  Just do it.”  He describes Auckland as “the ‘preferred’ choice by everyone from the teams, to the general public, to the commentators and organisers and to the sheer romance and dignity of the America’s Cup itself.”   He adds: “It’s the impossible dream but tell me, what’s truly worth having that isn’t worth fighting for?”  

As to the $200 million that Grant Dalton claims is needed, Wheatley says that is “poppycock if it’s in Auckland”.  Unlike new hosting entrants abroad, the “infrastructure is there and awaiting a return on investment – you know, the stuff that was lumped into the final bill when the numbers were tallied – and everything is ready to go”, he says.  (Economists would call that at this point a sunk cost.)   Needed for the team itself going forward?  Wheatley suggests $40-$60 million.

With Covid eventually under control, he says: “Fast forward to the end of 2022 and New Zealand is rock and roll again – locked and loaded and ready to welcome the world.”  This is a man who, let’s not forget, is not a Kiwi but who is steeped in the history and tradition of the America’s Cup.  If the Defence does go off-shore, he concludes, it will be a decision that will haunt, a mis-step that the Kiwi public won’t forget and the start of a dramatic decline in New Zealand’s passion for the competition.  Right now, he says, New Zealand is “the pinnacle in sporting and hosting terms – why would you give that up for anything?” The first of his two postings last week ends with a firm judgment that “the right thing to do is host in Auckland … [that would be] a famous victory for common sense and decency.”

To similar effect in the latest edition of Seahorse, the magazine of the Royal Ocean Racing Club, in his regular column, Rod Davis (former Team New Zealand skipper and coach and Olympic Gold Medal Winner) interprets Dalton’s assertion that Team NZ and the America’s Cup are a business “and we will treat it that way” as meaning that it’s not what Team NZ needs but what it can get.  A business?   Rod doesn’t hold back:  “REALLY boys!!  When the New Zealand government sinks hundreds of millions of dollars into your challenges and defences and bends the rules to allow America’s Cup teams and their families into the country in the middle of a world pandemic.”  But then, he says, “maybe it is just a business decision. Nothing personal New Zealand, just business – you can watch it on pay TV.  That is the new shape of the America’s Cup.  Just doesn’t feel right to this Old Boy.”

Back to the money (needed as opposed to wanted) and let’s assume (though with a large degree of scepticism) that the total cost for Event and Team is $200 million.   Enter left stage Mark Dunphy, majority owner of Greymouth Petroleum, stating unequivocally that private money is available in New Zealand for the $80 million gap that TNZ claims is needed to bridge the gap between the amount its own commercial sponsors would provide (also $80 million), Government money ($31-40 million cash but another $60 million in kind).  

Dunphy has received strong pushback from TNZ and from Dalton in particular in media statements that Wheatley, in the second of his blogs, describes as being “intentionally divisive narrative around Mark Dunphy”.  This needs to change, he says, and Dunphy’s “bravery in tabling the bid and corralling backers needs to be applauded”.  Team NZ, he says, “must get onboard quickly.  This is a saviour moment.”  He is rightly scathing of the foreign bids:

“The foreign bids, let’s be honest here, are a pack of cards teetering on the brink.  They are Sirens calling the Cup on the rocks.  Every way you look at them, there’s 99 problems and the simple fact is that New Zealand magnificently won the Cup in March with fabulous, bought-in-home support amidst gloomy global times and the public deserve to have the next defence in home waters.”

Wheatley repeats his view that an Auckland “post-pandemic open-for-business” hosted AC37 in 2024, with the introduction of the AC40s as supporting acts for women and youth sailing, will be “the most successful, glamorous, inclusive, positive America’s Cup in history”.   He urges the RNZYS, the New Zealand Government and Team NZ itself to be “immensely supportive and collaborative … to get Auckland over the line.”

Leaving aside the current Dalton spin and the nonsensical reference to 2003, it is obvious that Team NZ, in its own interests as well as those of Auckland and New Zealand, should take seriously Mark Dunphy’s overture.  Regrettably, however, Grant Dalton’s only response to date on the Dunphy proposal has been to say that for reasons of “good governance” he needs to know the names of all the contributors to Dunphy’s proposal.

Hmm… again.Senior business journalists (Fran O’Sullivan, NZ Herald, and Pattrick Smellie, BusinessDesk) last year, when the standards of the internal accounting of Team NZ and its sister company America’s Cup Events were under Government scrutiny, commented on the adverse governance of the structure and operation of those companies – separate boards seemingly but with Dalton as CEO of both.   That position has not improved.  To the contrary, nearly 4 months ago, Sir Stephen Tindall vacated his position as Chairman of Team NZ and resigned from the board.  Dalton assumed the position of “Acting” Chairman of TNZ, which he continues to hold today.  It’s actually worse.   Sir Stephen resigned his position as one of the two trustees of the Team NZ Trust (a charitable trust) that owns the shares in TNZ.   Dalton took his place.  In conventional company law and governance terms, the CEO is accountable to the board, the board is accountable to the shareholders.   Not sure that Grant should be the one to be expressing concern about corporate governance.

Now is the time for the RNZYS to step forward out of the shadows and take the lead in getting all the stakeholders – the Squadron itself, Team NZ, the Government, the Council, Mark Dunphy representing the private funders – together to make sure an Auckland Defence of AU37 happens.  And, to adopt the final word of an Englishman (Magnus Wheatley) no less, on the subject: 

“Don’t let this descend into a mud-slinging, ping-pong battle of words, get an agreement to work together in place and get the job done.  It’s the Kiwi way.”


20 September 2021

Jim Farmer

[Declarations of interest: I have acted professionally as counsel both against Greymouth Petroleum and, more recently, for it.  I was also a director of Team New Zealand from 2004 to 2013.  I have been urging on this blog that the America’s Cup should be defended in New Zealand in a number of postings since December 2017, when the Cup was regained by the RNZYS and Team NZ and the prospect of it being defended offshore was first raised.]


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