McLaren taking former driver ‘to the cleaners’ after contract breach, court told

McLaren has been accused of seeking to take one of its former drivers “to the cleaners” for millions in damages at the High Court after he breached his contract.

McLaren Indy LLC and McLaren Racing, which run the Arrow McLaren IndyCar team and McLaren’s Formula One team, are claiming around 21 million US dollars (£15.5 million) in losses from Alex Palou and two companies connected to him.

A trial in London was told that the 28-year-old, who has won four IndyCar championships, agreed in October 2022 to drive for McLaren in 2024, 2025 and 2026, but in August 2023 announced that he would not fulfil the agreement.

The Spaniard has since admitted breaching the contract, but disputes that he should pay damages.

Barristers for McLaren told the court on Thursday that the breach of contract has had “serious and enduring consequences”, including the loss of profits, sponsorship revenue and “on-track success”.

Lawyers for Mr Palou said the damages claim is “vastly inflated” and is a “bare-faced attempt to ‘take Mr Palou to the cleaners’”, and instead suggest that McLaren has since earned more than it alleges to have lost.

Mr Palou won the 2021, 2023, 2024 and 2025 IndyCar championships and also won the 109th Indianapolis 500 race earlier this year, making him the first Spaniard to achieve both.

He raced for Chip Ganassi Racing (CGR) in the IndyCar series before agreeing to drive Arrow McLaren’s Car 6, but then returned to CGR.

Paul Goulding KC, for McLaren, said in written submissions for the trial that Mr Palou was a “serial winner” and that his recruitment was a “coup” which promised an “era of increased success”.

But he claimed that after signing for McLaren, Mr Palou “cynically decided that a big money offer to stay with CGR was more important than honouring his contract”, and said that the driver’s “personal ambitions far outstrip his respect for his legal obligations”.

Mr Goulding continued that a week before Mr Palou said he would not fulfil his contract, CGR had agreed to pay all damages and costs arising from the dispute.

He said: “The financial loss and reputational damage that Mr Palou’s breach has caused McLaren is far-reaching and likely to be long-term.”

McLaren is seeking more than 7.2 million US dollars (£5.3 million) arising from the renegotiation of a sponsorship agreement with IT firm NTT Data Americas following Mr Palou’s departure, and more than 6.8 million US dollars (£5.1 million), which it claims it will lose in other sponsorship revenue.

Mr Goulding said the renegotiation of the NTT agreement was “effectively unavoidable” as it had been entered into “on the clear understanding” that Mr Palou would drive for McLaren.

It is also claiming more than 1.3 million US dollars (£963,000) in additional salaries paid to other drivers of its three IndyCar cars following Mr Palou’s departure, including Pato O’Ward, the return of Mr Palou’s 400,000-dollar (£296,000) sign-on bonus, and other sums.

Mr Palou is due to give evidence later in the trial, with his barrister, Nick De Marco KC, stating in written submissions that his client joined McLaren as it was his “motivation” to drive in F1.

But there was a “disappointment of Mr Palou’s hopes and expectations” of an F1 seat, which caused “the breakdown of Mr Palou’s confidence in McLaren”, the barrister continued.

Mr De Marco said the renegotiation of the NTT deal was not “anywhere near as bad” as had been claimed and that there was “absolutely nothing” in the deal that made its terms conditional on Mr Palou driving for McLaren.

He also said that claims McLaren had lost millions in other sponsorship deals were “entirely spurious” and “wholly overblown”, that the increase in driver salaries was not as a direct result of Mr Palou’s exit, and that his client was not required to pay back his signing bonus.

Mr De Marco further claimed that one of the drivers recruited by McLaren, 20-year-old Nolan Siegel – the son of a US venture capitalist – was paying to drive for the team, which the barrister said could cancel out the claimed losses.

The trial before Mr Justice Picken is due to conclude in November, with a judgment expected in writing at a later date.