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America's Cup Event organisation obtains Court injunction on confidential report publication

by Richard Gladwell 2 Jul 12:18 BST 2 July 2020
The America's Cup - "a perpetual Challenge Cup for friendly competition between foreign countries" © Scott Stallard

America's Cup Event Ltd and Team New Zealand Ltd have obtained an injunction in the High Court in Auckland precluding news organisations from publishing details of a leaked confidential draft report, commissioned by the Ministry of Business Innovation and Employment, into the spending of the NZD$40million Event Fee by the team and event company.

On Monday evening, June 29, Team New Zealand Ltd issued a media statement saying they had outed informants within the organisation and their contracts with the organisation have been terminated.

On Wednesday morning the New Zealand Herald published extracts from a draft preliminary and confidential letter dated June 22, said to be jointly written by Auckland Council and MBIE.

Team New Zealand responded with a lengthy statement on Wednesday afternoon, pointing out that the New Zealand Herald appeared to be unaware of a second letter written by the team in response, which answered the claims made.

Under the Hosting Agreement for the 36th America's Cup, Auckland is named as the Host City and New Zealand as Host Country for the 36th Match and Challenger Selection Series (Prada Cup).

By winning the 35th America's Cup in Bermuda, the right to stage the next America's Cup becomes the property of the Royal New Zealand Yacht Squadron and its team Emirates Team New Zealand, as set out in the 1887 Deed of Gift for the trophy registered with the New York Supreme Court, and is beyond the reach of New Zealand legal jurisdiction.

After protracted negotiations, the team signed a Hosting Agreement with Auckland Council and MBIE.

For about a week, when negotiations were stalemated, there was a real chance the America's Cup would have been staged in the alternate venue named in the Protocol, which was Cagliari, Sardinia - home base of the Challenger of Record, Luna Rossa Prada Pirelli. Prada is the presenting sponsor for the Challenger Selection Series and America's Cup.

In simple terms the Hosting Agreement says that in return for an Event Fee of NZD$40million (USD$25.5million) Team New Zealand and America's Cup Events will deliver all aspects of "the on-water and on-land delivery for the Events".

That includes on the water race management, media and spectator control, and communications (including the Host Broadcast). Ashore ACE is responsible "for all other aspects relating to the staging and management of the Events," i.e. the Prada Cup and America's Cup and any associated legal obligations, licences etc.

For its part Auckland Council agrees to "deliver to ACE..at no fee...the sites...identified in the map titled Wynyard Quarter AC36 Race Village" etc. The rest of the Hosting Agreement includes a more detailed expansion of these basic roles and obligations.

Of course, Auckland Council owns the land on which the America's Cup facilities are located and is responsible for the associated costs. While some of the works were directly related to the America's Cup, others were long overdue contaminated land rectification and stormwater issues. The majority of the NZD$200million expended covered rectification as well as new works. They will remain an asset for Auckland Council and future generations, as happened in 1995-98 with the conversion of the Viaduct Harbour from a decrepit backwater to the crown jewel of the City.

Payment of the Event Investment of NZD$40million by MBIE to ACE is to be made according to a redacted schedule of "Funding Milestones and Payment Instalments" provided ACE "delivers to the Hosts the material to satisfy the relevant Funding Milestone"... "no less than 30 days prior to the relevant Payment Instalment Date." There are also the usual commercial and exception provisions with payments and reporting.

So far NZD$29million has been paid to ACE under the Agreement.

In the current circumstances, it is clear in the Agreement that each party is responsible for the actions and omissions of its employees and contractors.

The payment, last December, of NZD$3million to an alleged scammer's bank account in Hungary by a contractor of ACE, would appear to be ACE's problem and not MBIE's.

And regarding reporting issues, ACE must deliver before an Event Steering Group, a break down of third party sponsorship progress and the rights entered into with those sponsors, and to ensure that third party sponsorships are maintained at a commensurate level.

If there is a determination of any wrongdoing to the Hosts (Council or MBIE), then rectification must be made to the Host's satisfaction. The examples given in the agreement are for a refund of the "misappropriated Event Investment", or "terminating the relevant personnel's employment within 30 business days following written notice of determination of the offence from the Hosts to ACE".

It would seem that in the current situation, all the matters ricocheting around the mainstream media are quickly resolved using the processes in the Hosting Agreement, as would happen in any commercial dispute.

It would seem that the announcement late this afternoon by MBIE that they were suspending payments under the agreement followed a response earlier in the day by the Minister of Economic Development that he hadn't considered whether or not to suspend payments pending a report on the investigation.

For their part, Emirates Team NZ told Sail-World that they had been aware of the payment suspension on Wednesday and it would not cause any immediate difficulties with the America's Cup - while the issues were worked through, in private, by the parties.

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