img3883June 22 - boats.com obtained the following application to the America's Cup Arbitration Panel this evening. As it is Sunday in Auckland, and very late Saturday night in Italy, representatives of Prada could not be reached for comment. We have asked for a comment and will update this page with a response from Prada if and when they issue one.

In this filing, Oracle asks the America's Cup Arbitration Panel to exclude Prada from competition for America's Cup, reasoning that their violation of the protocol article 10 by filing a suit in New Zealand High Court would preclude them from signing the declaration called for in section 6.4:

6.4 No Challenger shall be accepted as Challenger under the Deed of Gift unless it shall first have declared in writing that it has until that time complied, and will thereafter until the conclusion of the Match comply, with the terms of the Conditions, this Protocol, the Deed of Gift, the Interpretive Resolutions and the decisions of the Arbitration Panel (excluding however any non-compliance by the Challenger with any of those documents which has already been ruled on or determined in accordance with the terms of those documents by the appropriate body or entity, provided the Challenger has fully complied with such ruling or determination and has fully satisfied any penalty imposed and provided that the Arbitration Panel has not expressly ruled or determined that the particular non-compliance by a Challenger makes it ineligible to become the Challenger under the Deed of Gift for the Match).

See rnzys.org.nz/americas/official/protocol.html for a complete text of the Protocol.

There is an interesting twist in that Prada sails under the burgee of the Yacht Club Punta Ala, which is the Challenger of Record and entrusted with enforcement of the Protocol along with the defender, Team New Zealand.

At this time we are unable to confirm that the referenced suit has been filed in High Court, we will confirm that within 24 hours when the court is in session.

If Prada has indeed filed suit against Oracle, it may have violated the Protocol, section 10.3 below. More on this story as it develops.
10.3 Without in any way limiting Articles 10.1 and 10.2, each Challenger and each Candidate for the Defence, by agreeing to be bound by this Protocol, is deemed to have undertaken on its own behalf and on behalf of each of its officers, members, employees, agents and contractors, that they will not, at any time, in relation to any matter governed by this Protocol, or in relation to any other matter concerning the Thirty First America's Cup, issue proceedings or suit in any court or other tribunal against all or any of the following:

(a) RNZYS or any of its officers, members, employees, agents or contractors;

(b) ACPI or any of its officers, members, employees, agents or contractors;

(c) any other Challenger, the Challenger of Record, or the CORC or any of their respective officers, members, employees, agents or contractors;

The Application:


21 June, 2002

Mr. J. Martin Foster, Registrar
America's Cup Arbitration Panel
74 Lake Road, Devonport
Auckland
NEW ZEALAND
Via e-mail: [email protected]

Dear Mr. Foster:

NOTICE OF APPLICATION - Breach of Protocol Art. 10 by Prada

Oracle Racing on behalf of Golden Gate Yacht Club ("Oracle Racing") makes this application to the America's Cup Arbitration Panel ("ACAP") seeking a ruling that Yacht Club Punta Ala dba Prada Challenge AC 2003 ("Prada") is in breach of Art. 10 of the Protocol.

Background

1 In January 2001 Prada and Oracle Racing entered into an agreement regarding placement of Oracle Racing's barge, and arrangements to physically limit visual observation between our adjoining Bases 1 (Prada) and 2 (Oracle Racing) on Halsey St. in the Viaduct Harbour. In June 2002 a supplemental agreement was entered into to give further assurances to Prada that Oracle Racing's ability to visually observe Prada's base would be physically limited. These agreements are Attachments "A" and "B," respectively. (Copies of both will be submitted to the panel via courier along with other attachments indicated below, and with copies to parties copied if and as directed by ACAP.)

2 The January 2001 agreement (as well as the subsequent June 2002 agreement) was an accommodation by Oracle Racing to Prada. Had Oracle Racing placed the barge in the location permitted under the Resource Consent granted to Oracle Racing by government authorities, Prada would not have been able to use one of its slips where its tender is docked.

3 Over the past several months Oracle Racing and Prada have had a number of discussions about the details of implementing the two agreements. Prada has stated repeatedly that Oracle Racing could be in violation of Protocol Art. 13 if our personnel could look out windows in the barge and observe Prada's boats as they are launched. Oracle Racing has denied and does deny that it has violated or will violate Art. 13 in any manner whatsoever.

4 Oracle Racing has stated to Prada representatives on a number of occasions that if Prada believes that these agreements and our actions under them do not provide sufficient protection under the Protocol Art. 13, then we would be more than willing to have the entire issue reviewed by ACAP.

5 Much to Oracle Racing's surprise, on 18 June, 2002 Prada as plaintiff filed a Notice of Proceeding, Statement of Claim, and an Interlocutory Application for Priority Fixture (CP no. 226/SW02) with the High Court of New Zealand, Auckland Registry naming Oracle Racing as defendant.

6 In summary, Prada alleges that "Oracle has breached and continues to breach the 2001 agreement by (a) failing to respect Prada's privacy; (b) failing to take appropriate physical and other precautions to ensure Prada's privacy is respected by Oracle; and (c) failing to install blinds or equivalent barriers to prevent personnel on the Oracle barge from being able to see into the Prada base." Prada also alleges Oracle Racing has breached the New Zealand Fair Trading Act for "misleading and deceptive conduct in trade or conduct in trade likely to mislead or deceive." Prada seeks orders of specific performance and costs.

7 On 20 June, 2002 Oracle Racing asked the Court to stay Prada's proceeding since all Challengers had undertaken not to issue proceedings against other Challengers in a court of other tribunal in any matter governed by the Protocol, and that any such complaint as Prada's is properly handled under the Protocol by ACAP. Our Application for Stay of Proceedings and an affidavit in support sworn by Melinda C. Erkelens, General Counsel of Oracle Racing are Attachments "C" and "D," respectively.

8 Prada's proceeding is pending before the Court, with the next hearing scheduled for late June or the first week of July.

Discussion

9 Art. 22.3 (d) of the Protocol states:

22.3 The Arbitration Panel shall be empowered as follows:

(d) to resolve disputes (other than those concerning the racing rules or any applicable Class or rating rule) between individual Challengers when one of those challengers so requests, or between an individual Challenger and the Challenger of Record.

10 Prada is required to use this provision of the Protocol to resolve any such dispute with Oracle Racing or any other team.

11 Art. 10 of the Protocol ("Acceptance of Protocol and Prohibition on Proceedings") states, in part:

10.1 As a condition of entry as a Challenger in the Thirty First America's Cup and in addition to all other requirements under the Deed of Gift, all Challengers are required under Article 1 to agree that they accept and will be bound by all of the provisions of this Protocol. In particular such acceptance includes an acknowledgement that all decisions rendered by the Arbitration Panel will be binding on all Challengers and RNZYS and shall not be subject to appeal or be referred to any court or other tribunal for review in any manner.

10.2 Any Challenger who resorts to any court or tribunal, other than the Arbitration Panel or any other dispute resolution body agreed by RNZYS and the Challenger of Record will, except as permitted by Article 10.4, be in breach of this Protocol and will accordingly be ineligible to make the declaration provided in Article 6 and to be the Challenger for the Match.

10.3 Without in any way limiting Articles 10.1 and 10.2, each Challenger and each Candidate for the Defence, by agreeing to be bound by this Protocol, is deemed to have undertaken on its own behalf and on behalf of each of its officers, members, employees, agents and contractors, that they will not, at any time, in relation to any matter governed by this Protocol, or in relation to any other matter concerning the Thirty First America's Cup, issue proceedings or suit in any court or other tribunal against all or any of the following:

(c) any other Challenger, the Challenger of Record, or the CORC or any of their respective officers, members, employees, agents or contractors;

12 Art. 10 of the Protocol, together with Art. 22 ("America's Cup Arbitration Panel and Dispute Resolution"), establishes the fundamental principle of the Protocol, designed specifically to keep teams from suing each other as happened during and following the unfortunate 27th (1988) America's Cup.

13 Clearly this proceeding resorted to by Prada in the High Court of New Zealand does not fall within the exceptions in Art. 10.4. Specifically, Prada's proceeding has nothing whatsoever to do with (as set forth in 10.4):

(a) any loss or damage in respect of usual marine risks and in respect of which claims would ordinarily be the subject of Hull, War Risk and P&I cover;

(b) any loss or damage to any other property used in connection with a Challenge or the Defence;

(d) any injury, loss or damage to a person, boats or other property as a result of wilful [sic] or negligent acts; or

(e) any person who is allegedly in breach of any confidentiality undertaking or restrictive covenant entered into with any Challenger or Candidate for the Defence.

14 Any argument that Prada's proceeding is permitted under exception (e) in 10.4 would be spurious at best. That exception is intended to allow a Challenger or the Defender to bring action against an employee ("person") who breaches his or her employment contract or non-disclosure agreement and who would not be under the jurisdiction of ACAP.

15 Prada's entire proceeding is summed up by paragraph (d) of their Interlocutory Application which states, "The proceeding relates to the enforcement of arrangements to protect the privacy of the plaintiff. The plaintiff requires the enforcement of the arrangements by the start of August 2002 at which time its yachts will again commence sailing in Auckland in preparation for the Louis Vuitton and America's Cup competitions." In other words, Prada want to restrict Oracle Racing from being able to visually observe their yachts from our base, a matter clearly covered by Art. 13 of the Protocol.

Summary

16 By failing to accept the dispute resolution mechanism provided in Art. 22.3 (d), and then by instituting proceedings in court against Oracle Racing, Prada has breached the fundamental principles set forth in the Protocol under Article 10. In accordance with Art. 10.2, Prada is therefore "ineligible to make the declaration provided for in Art. 6 and to be a challenger for the Match."

Address for Service

Oracle Racing
Base 2, Halsey St.
Freemans Bay
Auckland
NEW ZEALAND
Tel: +64-9-359-9246
Fax: +64-9-359-9262
E-mail: [email protected]

Sincerely,
ORACLE RACING