The FIA World Council has been meeting today in Paris and has ruled the that there will be the possibility for F1 teams to compete with cars built and operated within a stringent budget cap of $42m. This figure will cover all expenditure of any kind. Anything subsidised or supplied free will be deemed to have cost its full commercial value and rigorous auditing procedures will apply. In order for the cars to be able to compete with the existing machinery, the cost-capped cars will be allowed greater technical freedom, including a more aerodynamically efficient but standard underbody, movable wings and an engine that is not subject to a rev limit or a development freeze. The FIA will have the right to adjust elements of these freedoms to ensure that the cost-capped cars have neither an advantage nor a disadvantage when compared to cars running to the existing rules.

In order to improve the quality of F1's presentation the FIA will publich car weights aftyer qualifying. The tyres will have different nomenclature with wet tyres becoming known as intermediates and extreme weather tyres becoming wets. In addition drivers will have to make themselves available for autograph signings in their designated team space in the pit lane on the first day of practice. Drivers who are knocked out in qualifying must be available for media interviews at the end of each session and all drivers must do the same during and after the race, depending on what has happened to them. During the races each team must have at least one senior spokesperson available for interviews by officially accredited TV crews.

The World Motor Sport Council agreed a radical addendum to the current Formula 1 Technical Regulations to come into force for 2010. The aim is to make it easier for new teams to enter and also allow existing teams to participate on much reduced budgets should they so choose.

The new approach gives teams a choice. They can either run under the current Technical Regulations (as modified in consultation with FOTA) or have greater technical freedom but be subject to a stringent and rigorously enforced expenditure cap.

In essence, this is a choice between (i) the current freedom to spend and continued adherence to the existing technical constraints and (ii) a new degree of freedom to innovate technically but with a severely restricted budget. The technical freedoms accorded to the low-budget teams will be adjusted from time to time to keep their median performance on a par with the median performance of the unlimited-expenditure teams. The regulations for the unlimited-expenditure teams will remain stable and fixed.

What is the budget figure?

Max Mosley: Provisionally it will be £30 million per two-car team per season (currently EUR33m, or $42m).

How can you possibly run a Formula 1 team for that sort of money?

MM: It has been carefully costed. The cars will be much less refined in detail, because the teams will not be able to spend huge sums on minute advantages (for example, $1,200 on a wheel nut which is only used once), but from the grandstand or on television they won't look or sound any less "Formula 1" than the current, ultra-expensive cars. They will also be more interesting to the technically-minded because of the special features which will allow them to compete against teams with much bigger budgets. And don't forget that £30 million is still a huge amount of money in the real world.

But surely that budget is not "Formula 1", what about Formula 1's DNA?

MM: Keith Duckworth once said "an engineer is someone who can do for one dollar what any idiot can do for a hundred dollars". These rules will encourage clever engineering - success will come to the teams with the best ideas, not only the teams with the most money.

What does the cap include?

MM: Everything except the motor home (if the team has one) and any fine(s) imposed by the FIA. All expenditure will be included, even the salaries of the drivers and team principal. If the team is profitable, it can pay a dividend to its shareholders, who may well include a chief engineer, team principal or even a driver. But we would make sure the team was genuinely making enough profit to cover the dividend.

How can you possibly check? Won't there be all sorts of under-the-counter payments and avoidance mechanisms?

MM: We went into all this very carefully some time ago. We involved forensic accountants from Deloitte and Touche as well as financial experts from the current teams. The vast majority of payments are traceable and any benefits in kind can be valued. There were a number of meetings. It became clear we could do it. The problem was getting the current teams to agree a figure. Also, the majority wanted a lot of exclusions such as land and buildings, the team principal's salary and the drivers. We would also need the right to carry out very intrusive audits and impose severe penalties for overspend. However these difficulties no longer arise because each team will now be able to choose whether or not to run under the cost cap.

What about the engine?

MM: The engine will comply with current rules, except that there will be no rev limit and no development freeze. However, the entire engine expenditure will come out of the cap. If the engine is supplied by an outside commercial entity or another team, we will have to be satisfied that there is no hidden subsidy. If a team has its own engine, we will check its full cost just as we will the rest of the car. The current rule limiting manufacturers to supplying engines to one additional team each will remain in place.

But surely this is going in the opposite direction to your cost cuts?

MM: No. If a team's total expenditure is limited, the money is saved so detailed regulation aimed at saving cost in specific areas are no longer needed. A team could spend £20 million a year on its engine but would then have only £10 million left for everything else. It would probably not be competitive. The same applies to the other restrictions which will be swept away for the cost-capped teams such as limits on wind tunnel use, testing, exotic materials or giant computers (subject of course to current safety requirements). They can even spend on private jets and luxury hotels. But whatever they spend must come out of the £30m.

What technical and other freedoms will the cost-capped teams have which are not available to the other teams?

MM: A different (but standard) under body, movable wings, no engine rev limit, no restriction on the number or type of updates, no homologation requirements, no limits on materials, testing, simulators, wind tunnels and so forth - most of the cost saving measures introduced over the last few years will not apply to these teams. However measures to save money during the race weekend, such as the ban on refuelling and the Saturday parc ferme, will apply to both categories of team. We are also thinking about a much bigger capacity KERS for the cost-capped teams. But all this must be covered by the £30 million - no exceptions and no free or subsidised outside help. Anything supplied by another team or an outside supplier will be included at its full commercial cost except for items supplied to all teams at subsidised rates under the single supplier arrangements negotiated by the FIA (e.g. for tyres), which allow all teams to benefit equally from reduced costs.

But isn't that unfair? With a specially shaped under body and movable wings won't these cars have an unfair advantage?

MM: No, we will make sure these advantages do no more than balance the disadvantages the cost-capped teams will have because of their very restricted budgets. As said, we will balance the median performances by adjusting the cost-capped cars should this prove necessary. The other cars will have stable technical regulations in return for which we understand FOTA intend to provide guarantees of continuing participation until 2012, underwritten by the major car manufacturers. The FIA has a lot of experience in performance adjustment and equivalence.

Could a team use the standard KERS proposed by FOTA?

MM: It could, but again this would have to come out of the £30 million. We are not keen on the idea of a standard KERS, because this is an area in which Formula One can innovate in a way that is road-relevant. But nothing in our current rules stops groupings of teams from agreeing parameters for KERS if they wish, because KERS is not compulsory. Perhaps the cost-capped teams will innovate in this area despite their restricted budgets.

Could a cost capped car win a race or even the Championship?

MM: There is no reason why cost-capped teams could not win races. The massive and highly organised unlimited-expenditure teams are perhaps likely to do a better job of going racing. They will have the most expensive race engineers and tacticians not to mention the top-earning drivers. However, racing is (and should be) unpredictable.

What about things you haven't thought of?

MM: We will have a catch-all clause for the cost-capped teams enabling us to stop anything which goes against the spirit of the cost cap and allow us to rule definitively on any unforeseen problem. The unlimited-expenditure teams however will benefit from absolutely stable technical rules. Rule stability is part of the above-mentioned deal which FOTA are arranging with the major car manufacturers.

Surely with the FOTA teams cutting expenditure by 50% in 2010 and further cuts in the pipeline for 2011, all this is unnecessary?

MM: Back in December when we met the teams in Monaco, we would have agreed. However, the world-wide economic crisis has worsened very significantly since then. No-one can say the situation will not deteriorate further in the coming months. If this happens, we may lose other manufacturers or even independent teams, despite their best intentions. If we wait and things get worse, it will be too late. Conversely, if economic conditions suddenly improve, we will at least have some new blood in Formula 1. It is obviously the FIA's duty to try to plan for the worst case rather than just hope for the best.

When will you publish detailed regulations?

MM: Shortly after the World Motor Sport Council meeting of 17 March.

When will teams be able to enter?

MM: As soon as the regulations are published.

But FOTA have not yet finalised their detailed proposals.

MM: We cannot wait, because new teams wishing to enter the 2010 Championship will need to start work immediately. FOTA have already given us their main ideas, we understand that the outstanding matters are more minor. Also, provided they comply with all relevant laws, rules and regulations and observe the spirit of sporting competition, there is nothing to stop some FOTA members agreeing among themselves to observe certain rules or conventions provided these do not affect anyone else.

What will you do if you receive more serious applications than there are spaces?

MM: We are going to ask the World Motor Sport Council to agree to increase the number of teams allowed to participate (currently 12) provided the Safety Commission is satisfied that circuit safety has progressed to the point where this would pose no safety problem. Each entrant will also have to satisfy us that they have a source for an engine and transmission.

Do you not fear that sponsors will reduce payments if they know teams cost less to run?

MM: No. Sponsors will pay what the brand exposure on offer is worth to them. Competitors in sports like tennis or golf earn large sums despite their costs being minimal compared to Formula 1. Sponsors in the current climate are more likely to be repelled by obvious profligacy than by a budget cap.

Will the cost-capped teams score points and be eligible for payments from FOM on the same basis as the other teams?

MM: Yes, the cost-capped teams and their drivers will participate fully in the FIA Formula 1 World Championship. We understand that FOM will pay the cost-capped teams on the same basis as other teams and will also provide $10 million plus the standard transport package for the 11th and 12th teams starting in 2010.

The FIA has announced its plans for a budget-capped F1 following the Extraordinary World Motor Sport Council held yesterday in Paris. As we suggested would happen the entries for the 2010 World Championship have been brought forward to put pressure on the F1 teams to enter. They must now make and entry between May 22 and May 29. Teams must state in these applications whether they will compete under the cost-cap regulations or continue without any restriction on spending. The maximum entry will be 26 cars, or 13 teams. The FIA will then publish a list of entries accepted on June 12. The FIA says that in 2010 the teams will have the option to build cars for under $58.8m (£40m). This budget cap will include all costs except marketing and hospitality, drivers, fines and penalties, engine costs and any expenditure which the team can demonstrate has no influence on its performance in the championship and dividends.

A new Costs Commission is being established to monitor and enforce these cost-cap financial regulations. The Costs Commission will consist of a chairman and two other commissioners, appointed by the WMSC for terms of three years. One Commissioner should be a finance expert and the other should have high level experience in motor sport. The chairman should have appropriate experience and standing in motor sport or sports governance. All members of the Costs Commission shall be independent of all teams.

In addition to the payments which it already makes to the top 10 teams in the Championship, Formula One Management, the commercial rights holder, has agreed to offer participation fees and expenses to the new teams. This includes an annual payment of US$10m to each team plus free transportation of two chassis and freight up to 10,000 kg in weight (not including the two chassis) as well as 20 air tickets (economy class) for each round trip for events held outside Europe. In order to be eligible for this, each new team must qualify as a constructor and demonstrate that it has the necessary facilities, financial resources and technical competence to compete effectively in Formula 1.

The cost-capped cars will be allowed to have movable wings, front and rear and no rev limit on the engines. These teams will also be allowed unlimited out-of-season track testing with no restrictions on the scale and speed of wind tunnel testing.

Refuelling during a race will be forbidden in order to save the costs of transporting refuelling equipment and increase the incentive for engine builders to improve fuel economy (to save weight). It was also confirmed that tyre blankets will be banned and that the ban on other tyre-heating devices will be maintained.

It was also confirmed that tyre blankets will be banned and that the ban on other tyre-heating devices will be maintained.

The FIA has quietly adopted the controversial winner-takes-all system for the 2010 Formula One Drivers' Championship in its regulations.

Motorsport's governing body caused a major hoo-ha in March when it announced that this year's title will be awarded to the driver who wins the most races instead of the driver who scores the most points.

They were forced to backtrack and defer the implementation of the new system until 2010 following complaints from the Formula One Teams' Association. FOTA also urged the FIA to change current points system to 12-9-7-5-4-3-2-1 in an attempt to offer more reward for the top three finishers.

However, the latest F1 sporting regulations published by the FIA reveal that next year's Championship will go the driver who wins the most races.

Rule 6 state: "The Formula One World Championship Driver's Title will be awarded to the driver who has been classified first in the greatest number of races, all official results from the Championship season being taken into account.

"Points will be awarded to all drivers in accordance with Article 6.4 below and, in the event that two or more drivers win an equal number of races, the driver with the greatest number of points will be awarded the Driver's title.

Toyota has become the first team to confirm it is unlikely to enter the 2010 world championship unless 'significant' compromises are made to plans for a voluntary budget cap for next season.

Amid increasing unhappiness from teams about the decision of the FIA to impose a two-tier budget cap system next year, with a number of outfits evaluating whether or not to hold back on entering the 2010 championship, Toyota president John Howett has said his team was currently not in a position to commit for next year.

Teams only have until May 29 to confirm whether or not they will enter 2010, although there is a chance they could be allowed in at a later date.

"Under the rules as they are published, we cannot submit an entry," he told AUTOSPORT in an exclusive interview. "There are concerns about the governance process within the sport, that there are clearly prescribed areas of discussion within the sporting and technical rules and we don't feel they are being complied with.

"From Toyota's perspective there are a number of concerns that really need clarifications before we commit to the future. We want to be here. We believe we have been a good corporate citizen within the F1 environment, but now we must reflect long and hard on what we do in the future."

When asked to clarify what the chances were of Toyota lodging an entry by the end of this month, Howett said: "I would say it is very likely we won't enter unless something changes significantly."

AUTOSPORT understands that FOTA members have discussed the possibility of a block boycott of entries for 2010 while discussions between teams and the FIA continue about implementing a future budget cap that is acceptable to everyone.

Furthermore, high level sources have hinted to AUTOSPORT that Ferrari is seriously evaluating a future outside F1 - having been left furious at both the imposition of a budget cap and the manner in which it has been introduced.

There are suggestions that some teams believe the FIA using last week's FIA World Motor Sport Council to push through the 2010 regulations went against official protocol - and also could be a breach of a 'veto' right that Ferrari is believed to have relating to future regulation changes it received as part of an agreement signed with Bernie Ecclestone and the FIA in 2005.

It is this right that di Montezemolo is believed to have been referring to in a letter he sent to FIA president Max Mosley last week detailing an agreement Ferrari had with the FIA confirming that the team would maintain contractual rights that existed under the 1998 Concorde Agreement.

"As you know additional rights were also granted to Ferrari on the same occasion and reconfirmed at a later stage," added di Montezemolo.

While time is running out for teams to settle their differences with the FIA, Howett conceded that his outfit felt comfortable about the possibility of switching to other categories.

In recent months, the Japanese manufacturer has been linked with a return to Le Mans – having last raced there in 1999. The company is believed to feel it has unfinished business at the French classic, having failed to win with its GT-One car.

Coincidentally, Ferrari president Luca di Montezemolo is to be the official starter at this year's Le Mans race amid suggestions he too could be seeing sportscars as the future for his team's racing programme.

Howett said: "I believe there are many other activities that we could undertake. We are a motorsport team and I think we are not against cost saving, we are not necessarily against budget cap but it depends how it is administered.

"It is value that is intrinsically important. What is the value of the environment we are competing in? There are many alternatives we can consider.

"Our real heart is to remain in F1, but now we have to start considering what are the best alternatives and discussing with the other manufacturer teams what their opinion is and what their intentions are."

FOTA is still pressing ahead with plans to implement dramatic cost cuts in F1, and hopes to submit proposals to the FIA within the next fortnight.

Howett added: "I think within Toyota we are really relaxed. We want to remain here, we want to be here next year, but if it is felt we are not welcome then we have got lots of other things we can do.

"We can be as competitive and happy doing that, so hopefully common sense will prevail. But we are becoming increasingly concerned about whether common sense does exist."

Red Bull's two Formula 1 teams will not be entered in next year's world championship, their owner Dietrich Mateschitz has confirmed, unless changes are made to budget cap rules introduced by the FIA.

With AUTOSPORT having revealed at the weekend that Toyota will not lodge its entry unless plans for a two-tier F1 are dropped, Red Bull Racing and Scuderia Toro Rosso are also set to join a boycott led by manufacturer teams.

Mateschitz visited the Spanish Grand Prix on Saturday, amid high political tension between the teams and FIA about cost-cutting rules that have been introduced for next season.

And he made it clear that Red Bull would join a host of manufacturer teams in withholding their entries for 2010 for now.

"If the proposed rules for 2010 remain unchanged, we will not enter next year's championship," said Mateschitz as part of an interview that appeared in the Austrian Salzburger Nachrichten newspaper on Monday.

"And I guess that won't do the works teams either. So possibly only two or maybe three of the existing teams will enter the championship.

"The conditions for 2010 at the moment make it impossible to sign in. But I hope there will be a meeting and a settlement before the entry deadline."

AUTOSPORT understands that unless a deal can be hammered out between FIA president Max Mosley and the Formula One Teams' Association (FOTA) when they meet before the Monaco Grand Prix, then the five manufacturer-backed tams plus the two Red Bull outfits will not lodge their entries.

Williams, Brawn GP and Force India are therefore likely to be the only teams to enter the championship. They will do so not because they do not support the opposition to a two-tier formula, but because their core business is racing in F1 - so to not be racing in 2010 would risk their company's futures.

Efforts have been made by Bernie Ecclestone in the last 48 hours to get the situation moving, with talk that the teams would like a set of technical regulations that allows any outfit to be competitive for 60 million Euros per year - with little to gain from spending more than that.

As well as the budget cap, there are concerns from teams about the FIA's governance of future rules.

In particular, sources suggest there is unease about the manner by which the FIA introduced the 2010 budget cap at an extraordinary meeting of the World Motor Sport Council, plus a new proposal that means teams have no guarantee of stopping rule changes proposed by the FIA alone.

A new Article 8 of Appendix 5 of the 2010 Sporting Regulations states: "The TWG and the SWG will be consulted on any proposal for change to the Technical Regulations or Sporting Regulations which did not originate in either Group and their comments, if any, will be made available to the World Motor Sport Council when such proposal is discussed."

Ferrari, which has had some form of technical 'veto' on rule changes is particularly unhappy about this situation. Sources suggest that an official statement from Ferrari is expected at some point this week to clarify its position in the controversy.

When asked for Ferrari's position on the matter by AUTOSPORT, team principal Stefano Domenicali said: "This weekend, I had other problems that took place. For sure as you know we are trying to find a solution because this situation with the actual regulations is something that we do not think is the right way to go. We want to find a solution."

Ferrari threaten to quit Formula One over budget caps.

The Italian company’s board apparently made the decision at a meeting on Tuesday afternoon.

"No F1 in 2010 if the rules do not change. Ferrari confirms its opposition to the new rules imposed by FIA and does not intend to register cars for the 2010 F1 world championship," a statement said.

The Maranello-based team, with its iconic scarlet cars, are by far the most widely supported Formula One squad, with fans all over the world. Races in the markets which the sport is hoping to develop, in the Middle East and Far East, are attended by thousands of local Ferrari aficionados.

Max Mosley, the FIA boss, is determined to reduce costs in the sport at a time of global recession. Ferrari has suffered poor results this season and would not wish to be prevented from spending money to recover its former dominance.

It is difficult to imagine Formula One without Ferrari; difficult, too to imagine how Ferrari will continue to sell its expensive, high-performance road cars without the prestige of racing success.

This looks like a stand-off. Expect Bernie Ecclestone, Formula One’s commercial rights holder, to step in and broker a deal, as he has done on many occasions before now.

But few as dramatic as this.

(CNN) -- Ferrari rocked the world of motor racing on Tuesday when the Italian Formula 1 giants announced they will not be entering a team for the 2010 world championships.

The decision is the result of a dispute with the sport's governing body, the Federation Internationale de l'Automobile (FIA), over proposed regulations to enforce cost caps upon teams on the Grand Prix circuit.

"Ferrari confirms its opposition to the new technical regulations adopted by the FIA and does not intend entering its cars in the 2010 F1 Championship," the team said in a statement on its official Web site.

The verdict not to enter F1 next season came at a meeting of Ferrari directors in Maranello, Italy -- and they made it clear that only a change of rules will see them reverse the decision.

Ferrari's statement added: "The Board of Directors also examined developments related to recent decisions taken by the FIA during an extraordinary meeting of the World Motor Sport Council on 29 April 2009.

"Although this meeting was originally called only to examine a disciplinary matter, the decisions taken mean that, for the first time ever in Formula 1, the 2010 season will see the introduction of two different sets of regulations based on arbitrary technical rules and economic parameters.

"The Board considers that if this is the regulatory framework for Formula 1 in the future, then the reasons underlying Ferrari's uninterrupted participation in the World Championship over the last 60 years -- the only constructor to have taken part ever since its inception in 1950 -- would come to a close.

"The Board also expressed its disappointment about the methods adopted by the FIA in taking decisions of such a serious nature and its refusal to effectively reach an understanding with constructors and teams.

"The rules of governance that have contributed to the development of Formula 1 over the last 25 years have been disregarded, as have the binding contractual obligations between Ferrari and the FIA itself regarding the stability of the regulations.

"The same rules for all teams, stability of regulations, the continuity of the F1 Teams' Association FOTA's endeavours to methodically and progressively reduce costs, and governance of Formula 1 are the priorities for the future. If these indispensable principles are not respected and if the regulations adopted for 2010 will not change, then Ferrari does not intend to enter its cars in the next Formula 1 World Championship."

F1 boss Bernie Ecclestone told the Times newspaper that he did not envisage the Italian team carrying through it threat earlier in the week.

"Ferrari are not stupid," he said. "They don't want to leave Formula 1 and we don't want to lose them, so we'll get to grips with it."

Ferrari's favorite son Michael Schumacher, the seven-time world champion, was back in the pits in Barcelona at the weekend advising his former team ahead of the Spanish Grand Prix that saw the team's current track frustrations continue.

Felipe Massa was their only finisher in sixth place while team-mat Kimi Raikkonen also has only three points to show from the first five races, leaving Ferrari struggling seventh out of 10 teams in the Constructors championship.

Kimi Raikkonen was their last world champion when he snatched the 2007 title from Lewis Hamilton's grasp in the final race of the season.

Jean Todt stepped down as team principal following that success and the 2008 campaign saw Ferrari driver Felipe Massa's joy turn to despair after the championship again went down to the wire.

Massa thought he had lifted the crown after winning his home Brazilian GP, but this time Hamilton triumphed after a last-gasp overtaking manoeuvre that saw him take fifth place for McLaren and the title.

Ferrari have taken that title 16 times including the last two years. But their challenge shot to a new level after the 1996 hiring of twice world champion Schumacher from Benetton along with technical director Ross Brawn whose own team now dominates the F1 standings.

Former F1team boss Eddie Jordan believes the FIA should take Ferrari's quit threat seriously, telling the BBC: "Maybe this isn't the posturing that most people think it is - I wouldn't be certain that they wouldn't carry this out.

"Ferrari shareholders are very concerned at the losses that are being made in the company at this time, the credit crunch has had an impact, and I think this (announcement) is different.

"Everyone concerned would be very silly not to put 100% of their time, effort and diligence into making sure there is compatibility between the sport, the governing body and Ferrari."

The Renault Formula 1 team and parent company Renault issued the following statement on Wednesday:

The decision of the Federation International de l’Automobile (FIA) to introduce two sets of Formula 1 technical regulations for the 2010 Formula 1 season has caused the Renault Group to reconsider its entry in next year’s FIA Formula 1 World Championship.

There is frustration that FOTA’s constructive proposals, including major cost saving measures to be adopted progressively between 2009 and 2012, which were carefully constructed by FOTA members, have been completely ignored without any form of consultation by the FIA with the teams.

It should be stressed that FOTA has set the same, if not lower, financial objective as the FIA, but Renault strongly believes that this must be introduced through a different procedure agreed by all parties.

Renault also believes that it is paramount that the governance of the sport is coordinated with a spirit of consultation with all parties (FIA, FOM, FOTA) in order to achieve a better balance between the costs and the revenues. Renault is also of the firm view that all entrants in the World Championship must adhere to and operate under the same regulations.

President of the ING Renault F1 Team, Bernard Rey, commented: “Renault has always considered Formula 1 as the pinnacle of motor sport and the perfect stage to demonstrate technical excellence. We remain committed to the sport, however we cannot be involved in a championship operating with different sets of rules, and if such rules are put into effect, we will be forced to pull out at the end of this season.”

ING Renault F1 Team Managing Director, Flavio Briatore, commented: “Our aim is to reduce costs while maintaining the high standards that make Formula 1 one of the most prestigious brands on the market. We want to achieve this in a coordinated manner with the regulatory and commercial bodies, and we refuse to accept unilateral governance handed out by the FIA. If the decisions announced by the World Council on the 29th of April 2009 are not revised, we have no choice but to withdraw from the FIA Formula 1 World Championship at the end of 2009.”

Formula One bosses, teams hold crisis talks
By Justin Armsden

LONDON, England (CNN) — Some of the heaviest hitters in the world of motorsports were coming together Friday in London a bid to steer Formula One out of what is fast becoming a crisis.

Max Mosley, president of the FIA, the International Automobile Federation, will be confronted at the meeting by the heads of Ferrari, Red Bull, Renault, Torro Rosso and Toyota. The teams have threatened to pull out of the sport if the FIA introduces sweeping budget cuts as planned next year.

At the moment, the big teams, such as Ferrari and McClaren, operate on annual budgets of $200 million to $300 million. The FIA wants all teams across the board to function on about $60 million a year.

Teams might decide to not stick with the budget cap, but those that do will get technical freedom. Opponents say that will make the sport a two-tier competition.

All the teams and the FIA have agreed that cuts need to be made amid the current global financial crisis and they have taken measures to reduce costs for this season. But the dramatic cuts for next season have the big spenders up in arms, with Ferrari leading the charge this week by threatening to end its 60-year relationship with Formula One.

Though the sport could barely do without a team such as Ferrari — research shows that one-third of all fans who turn up at races go to watch the Ferrari team — Mosley remains resolute in pushing forward with the cuts.

He has been buoyed by recent news that Aston Martin, the English car maker, would enter Formula One if the new cost cuts were introduced.

Two more teams are set to enter the competition next year, which means the grid would be full but perhaps not complete.

Friday’s meeting in London is aimed at thrashing out an agreement to put to rest, for the moment, the infighting that has blighted Formula One in recent times.

This latest battle off the track comes a year after the McClaren team was fined $100 million for spying on Ferrari. This year, defending champion Lewis Hamilton was found guilty of lying to race stewards.

The meeting is taking place two days before the sport’s marquee event, the Grand Prix in Monaco.

The meeting between the Formula 1 teams and the FIA and Bernie Ecclestone failed to reach any agreement on Friday. Things were not helped by the fact that FOTA chairman Luca di Montezemolo was not present because of the death of his father. Ferrari was thus represented by team principal Stefano Domenicali. While the meeting was taking place word was received from France that Ferrari had applied for an injunction to stop the FIA from instituting its 2010 Technical Regulations. The arguments for this are apparently based on a deal that was struck between Ferrari, the FIA and Formula One Management in January 2005.

At the time an announcement was made, in which it was said that "the FIA, Formula One Management and Ferrari have agreed to prolong the Concorde Agreement for the period 2008 to 2012" and quoted Max Mosley, Bernie Ecclestone and Luca di Montezemolo all saying that the agreement would stabilise Formula 1.

The details of this agreement have never been made public but it seems that it included not only a substantial payment each year to Ferrari, but also a veto on the technical regulations in the future. According to our sources, the document even stated that if the new agreement was not validated by all the other teams, the old Concorde Agreement would prevail. If that is the case, therefore, Max Mosley does not have the right to make any rules and regulations without the Formula 1 Commission being involved. This body has not met for several years.

Whatever the details, Ferrari lawyers must believe that they have a good case.

We hear that Mosley was conciliatory in the course of the meeting but that there were moments of tension with Toyota and Renault in particular.

The meeting broke up when it became clear that the legal action had been started.

Ferrari loses its case
Ferrari has failed in its attempt to get an injunction to stop the FIA going ahead with its 2010 plans. Ferrari says that "the existence and validity of Ferrari’s right of veto, as sanctioned in a written agreement with the FIA Senate, were recognized by the Court, as was the fact that this dispute is of a contractual nature. Consequently, it was also recognized that the dispute was not a matter for the internal tribunal of the FIA, but rather a matter for normal civil courts". The court however rejected the injuncton because it felt that the veto should have been exercised during the World Council meetings of March 17 and April 29 and chose to let the civil law courts rule on the urgency of the matter.

The decision does, however, mean that the teams will have to enter the World Championship by the deadline imposed or will face the possibility of being excluded. If they do enter they will be accepting the rules.

Ferrari says that it is continuing to evaluate whether or not to continue with the legal action and says that it will not enter the championship, while at the same time trying to find a solution to the problem with all the parties concerned. Ferrari argues that "the planned scenario would see a watering down of the characteristics that have endowed Formula 1 with the status of the most important motor sport series and that have specifically led to the Maranello marque’s uninterrupted participation in the world championship since 1950. In this situation, Ferrari will continue to compete in races of a calibre worthy of the marque, matching its level of innovation and technological research".

There is a separate issue regarding the legality of the Ferrari veto, as there may be arguments that this is anti-competitive under European law.