America's Cup: Iain Murray explains reasons for Australian withdrawal

Team Australia AC45 - Sydney, Australia
Hamilton Island Yacht Club CEO, Iain Murray told Sail-World that the decision to withdraw from the 35th America’s Cup was only made in the last 48 hours.

'This challenge has grown to the point where the gap between the commercial side and the competitive costs' are out of HIYC’s comfort zone

'The Cup campaign has grown into a far bigger cost and potential risk, with which they are not comfortable.'

Regatta Director Iain Murray - at this morning’s America’s Cup media Conference
'We've had a detailed assessment of the campaign, and have had expert advice from a lot of expert companies that deal in the commercial area. Even though I think the commercial feeling is very positive towards the America’s Cup, the timeline is the killer in this Cup.

'Sponsors want to know where the venues are, and the dates. The gap gets pretty wide trying to get the sponsors to commit against the timeline of the expenditure.'

Murray’s comments come after the shock withdrawal of the Challenger of Record for the 35th Match - the second time in the last two America's Cups that this has happened.

Protocol process is clear
Under the Deed of Gift, the 19th-century document that governs the ongoing conduct of the America’s Cup, the first Challenger to file a letter of Challenge with the Defender becomes what is known as the Challenger of Record.

That yacht club then undertakes the process of sorting out the terms of the Match with the Defending Club, in this case the Golden Gate Yacht Club of San Francisco. Those terms are known as the Protocol, which runs until the America’s Cup Match has been sailed, when the process starts again. The Protocol contains the provision for there to be more than one Challenger accepted, and they sail off in a Challenger Selection Series better known as the Louis Vuitton Cup.

The Challenging process is carefully arranged so that a friendly challenge is accepted, under pre-arranged circumstances. In this case, the Challenge was made by a business representative of the Oatleys soon after the end of the 19th race in the 2013 America’s Cup. A second, back up challenge is believed to have been filed at the time.

The club challenged with a 90ft monohull for a match to be sailed in early September 2017. All aspects of the Match, including the boat, can be varied by Mutual Consent between the Challenging and Defending Clubs in the Protocol.

If the Challenger of Record drops out the mantle falls to the next Challenge received. Overall there is little effect, at this stage, other than the number of Challengers reduces by one. During the Match as one Challenger of Record is eliminated, they are replaced by the next entered team who is still alive in the regatta.

The primary advantage of the role is the ability to negotiate a Protocol and to have the power of veto in any changes. The initial Challenger of Record has never won the America's Cup, and the role is widely regarded as being a Poisoned Chalice.

The Protocol for the 35th match was announced on June 3, eight months after the conclusion of the previous Match.

Significant issues between two groups
During the negotiation there were significant points of disagreement between then Challenger and Defender being the split venues, the media rights, costs. Those still remain plus the lack of oversight by the International Sailing Federation.

Murray would not confirm that two Challenges have been lodged to date. Sail-World’s sources say that Luna Rossa and Artemis Racing lodged Challenges ahead of the August 8, deadline set in the Protocol.

Iain Murray, Matt Belcher and Sandy Oatley - Team Australia launch - Sydney - Thursday, March 6, 2014

Murray said the decision to not proceed further in this America’s Cup regatta was made only in the last 48 hours, and after the Competitors Meeting held on Los Angeles last weekend. That meeting was called by Hamilton Island Yacht Club, not by the Defender.

'The Competitors meeting was the last stage in a world trip,' he said. 'We were initially focused on commercial opportunities. When we arrived back in Australia, we reporting on that exercise and the Competitors Meeting. The Board took the position they have just announced.'

Murray says most of the key points from the Competitors Meeting are already reported.

'I have to say that I thought it was one of the best meetings we have had of all the teams. I thought there was a very good collegiate atmosphere, along with the desire and will to work together. More so than I have seen in the last three years, which was great.

The Challengers are looking to work with the Defender for them to understand all the difficulties that are in front of all the competitors.

'All the Challenger teams are looking for commercial support – even the ones with substantial people behind them.

Murray mentioned the issues surrounding the concept of a separate Qualifying series at a separate venue, if there are more than four Challengers. The preliminary series has been a contentious issue, on a number of fronts.

'I don’t think that anyone favors the split venue. The split venue is a difficult piece. With a large number of Challengers, it makes some sense. But it certainly adds cost to the campaign.

'There’s a lot of Catch-22’s in the way this America's Cup is set up.

'Teams want to know what they are doing before they commit, and the defender wants teams to commit before he can do his commercial side. It’s a difficult situation for everyone. The numbers, the fees and commitments that are at stake are substantial.'

Relationship with Coutts:
Murray would not be drawn on his working relationship with Russell Coutts, who is currently heading up the America's cup Events Authority (ACEA). 'I spoke to him yesterday for the first time in three months', Murray said.

03/08/2013 - San Francisco (USA,CA) - 34th America's Cup - America's Cup Hall of Fame - Lucy Jewett, Noël Robins, Grant Simmer induction party at De Young Museum - Sir Russell Coutts
'I am sure Russell is disappointed we've withdrawn.'

'We have spoken to most of the teams, and they are all disappointed. As I said, there was a very good feeling of strength between the Challengers at the Meeting and wanting to do the right thing by the event. It's a bit sad for that to be diluted. Everyone has seen and known this group for a long time and know that they take their yachting very seriously. This hasn’t been an easy decision.'

Having laid the groundwork for a successful event formula in the 34th America's Cup, with the change to the AC72 wingsailed multihull, the stadium course at San Francisco, and the fresh regular breeze, why does Coutts want to walk away and start something new?

Murray doesn't have the answer.

'I think that view is shared by a lot of people. There is no doubt that San Francisco is a great place to sail. Can the commercial issues be overcome there? I don’t know.'

'Obviously to run these events, they cost a lot of money. But you have to have competitors who can reach their financial goals as well. In the next edition of the America's Cup, I think most people expected a progression from San Francisco. I am not sure if that is what we have got right now.'

Second AC62 not raised
Murray denies that the Competitors Meeting resolved to send a letter to ACEA outlining the concerns of the group. 'No letter has been sent yet. ACEA was represented at the meeting, and they heard it all first hand,' he adds.

The vexed issue of a second AC62 for the Challenger teams was not discussed at the Competitors Meeting. 'It was never put on the table,' says Murray. 'I don’t think any of the Challengers think that it is a materially damaging position to be in. Not one Challenger has said to me 'why did you do that?'

'It has been discussed fairly extensively how the Defenders can use their second AC62 and for what they can use it.'

'The issue was not raised at the Competitors meeting, and I think that is indicative of how big a deal it is to them,' Murray concludes.

A surprise packet in the venue list for the 35th America's cup has been the inclusion of the tax haven of Bermuda, a British Overseas Territory located 650 miles from the US coastline.

While many were surprised to see the island on the initial list of four venues, even more surprising was to see it make the final two. Coutts' decision to keep Bermuda in the viewfinder has caused real concern amongst most, if not all Challengers.

'Certainly a concern of ours is that the opportunities to commercialize around Bermuda are certainly more difficult,' Murray explains. 'It’s on the opposite side of the world from where we are, and the issues start from there. We haven’t been able to find companies that are excited about Bermuda.'

Emirates Team New Zealand follows Oracle Team USA around the first mark in race five on day three of the America's Cup 34. San Francisco. 10/9/2013

Whether Team Australia/Hamilton YC are the only team to exit the America's Cup remains to be seen. Six Challengers attended the Competitors meeting in Los Angeles - UK, Australia, France, Italy New Zealand and Sweden. The Defender USA was also present along with ACEA.

'There were six teams, at the meeting plus Oracle. We’ve spoken with the Russians and the Chinese from last time - who are different from the Chinese we have all heard rumours about. I don’t know of any others,' Murray told Sail-World.com

The transition to a new Challenger of Record is expected to be a carefully managed process as prescribed by the Protocol.

'We have given 90 day's notice of our intention to withdraw as we are required to do under the Protocol,' says Murray.

Given that there is either a backup Challenge believed to be from a Canadian club or either Kungliga Svenska Segel Sällskapet (Artemis Racing - SWE) or Yacht Club Italiano (Luna Rossa - ITA), the new Challenger of Record will be named by the Defender, Golden Gate Yacht Club.

That club will then be invited to sign the existing Protocol, or negotiate a new one. KSSS, on 2013 form, are widely regarded as a soft touch for Golden Gate YC, while Luna Rossa will be difficult.

'I think it is time for all the parties of interest, Defenders and Challengers, to all work together for the best outcome,' is Murray's signature comment.