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Matthew Hooton: America’s Cup – why Team NZ does not hold all cards over 2023 location

OPINION:

On whether Te Rehutai will prevail in the America’s Cup, I defer to the Herald’s sailing expert, AUT professor Mark Orams. He says Te Rehutai is the favourite.

That means the Royal New Zealand Yacht Squadron (RNZYS) may be just a fortnight away from confronting whether it is an institution worthy of that name, or a mere fig-leaf for foreign commercial interests.

In Wellington, Prime Minister Jacinda Ardern, Finance and Sports Minister Grant Robertson and Economic Development Minister Stuart Nash also have a fortnight to resolve whether to embrace the Cup specifically, and sailing generally, as essential to New Zealand’s economic, technological and cultural story, or dismiss it as an idle indulgence for the rich.

More personally, Emirates Team New Zealand chief executive Grant Dalton faces the question of what his life in sailing has been for.

Around 1.67 million New Zealanders participate in marine sports and more watch Team New Zealand on TV than the All Blacks.

The country’s peculiar relationship with the America’s Cup goes back to the KZ7 summer of 1986/87. That laid the foundation for a succession of great New Zealand yachting triumphs in every major event.

It also built a New Zealand marine industry capable of humbling the United States, the most technologically advanced nation in history, and marketing its high-value products accordingly.

New Zealand’s financial and emotional investment in theCup — and the obvious returns in foreign currency and national pride — lie behind the shock when the Herald revealed that Team New Zealand management has been shopping the next event to overseas venues.

The assumed rule, albeit breached by Société Nautique de Genève and Golden Gate Yacht Club, was that to host the America’s Cup you had to build a boat and win it. Like the Ranfurly Shield, hosting was the real prize.

Ardern, Robertson, Nash and the Ministry of Business, Innovation and Employment had no idea of the foreign pitch process the Herald revealed, despite taxpayers putting in $136 million for Cup-related infrastructure costs for the 2020/21 event.

Similarly, Phil Goff’s Auckland Council wasn’t asked to participate, despite investing $113m of ratepayers’ money into infrastructure and other costs for 2020/21.

Team New Zealand’s moves were clearly news to members of the RNZYS, which is the legal holder of the Cup, even if Team New Zealand’s pitch document claims it will be “the new defender and rights-holder of the event and essentially is the key controller and decision-maker of all aspects of the event”.

Ardern, Robertson, Nash and Goff may be tempted to speculate whether Dalton is using foreign bids to pressure them for more cash, or if his vision really is to take the Cup offshore for the $80m hosting fee allegedly previously offered by Abu Dhabi and Sochi.

Either way, any negotiator would want to get some leverage.

Dalton rightly argues we risk repeating 2000, when foreign billionaires offered victorious Team New Zealand members money they couldn’t refuse.

But even if another venue is really offering an $80m hosting fee during a global pandemic, Team New Zealand couldn’t access it for at least three months anyway — the time it is contractually obliged to first negotiate in good faith with Ardern’s Government.

In the meantime, the poaching risk that Dalton says drives him remains acute.

But it also means, for at least three months, that the only large chequebook Dalton can realistically access is Robertson’s. The sports-mad Finance Minister is almost certain to follow Bill English and Steven Joyce and offer an immediate $5m to retain talent, or perhaps a little more — but with conditions, including around location.

The taxpayer’s chequebook is not Robertson’s only leverage.

The precise legal relationships between RNZYS, Team New Zealand and America’s Cup Events are opaque, but one thing is indisputable. The controlling authority for the America’s Cup is the New York Supreme Court, and the only rules it cares about are the 1857 Deed of Gift.

The deed is unambiguous: “It is distinctly understood that the Cup is to be the property of the Club, subject to the provisions of this deed, and not the property of the owner or owners of any vessel winning a match.”

Were RNZYS and Team New Zealand ever to clash in the New York courts, both sides know the squadron would win. Should it choose, RNZYS can confidently assert its rights.

If the RNZYS, which holds the Cup, gets close to the Government, which holds the only short-term chequebook, Dalton has nowhere to go.

If they judge Team New Zealand won’t negotiate in good faith, there is a further option.

Beyond the defending club, the only party the deed recognises is the yacht club from another country that first lodges a valid challenge, and meets certain tests.

After Michael Fay’s surprise challenge in 1987, both sides in an America’s Cup match arrange a preferred challenger to hand them the necessary paperwork just in case their boat wins.

Having fallen out with the Italians, Team New Zealand management is apparently talking to the UK’s Royal Yacht Squadron. But there is no reason under the deed that the RNZYS couldn’t arrange for, say, the Royal Perth Yacht Club to hand its commodore the paperwork the instant Te Rehutai crosses the line. All decisions about the next regatta would then be negotiated between RNZYS and Royal Perth.

None of this should be necessary. Dalton must know he risks a public relations debacle.

Hopefully, he knows his destiny is not to be the villain who sold New Zealand’s Cup for 30 pieces of silver. Instead, the toughest of all the hard men in international yachting deserves to be the hero who brought the Cup home in 2017, retained it in 2021, worked with the Government and RNZYS to keep Team New Zealand together, found new sponsors to replace Emirates, passed the whole structure to the next generation of Kiwi sailors, and celebrated with all of us when Te Rehutai 2 successfully defends the cup in Auckland in 2023.

– Matthew Hooton is an Auckland-based PR consultant.

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