Earlier this week we read news that Proton had proposed a six million British Pound out of court settlement for the name dispute between Team Lotus and Group Lotus, which was rejected by Team Lotus boss Tony Fernandes because it was too low. The settlement was basically for Tony to stop using anything to do with Lotus in his team name. It was not for Tony to tell his team to pack his bags and leave F1.

Tony would still have his organisation structure intact, but then this brings along a few other implications. His team was the best of the newcomers in 2010 in achieving 10th place, which comes together with prize money. There’s no official word on how much the prize money is as it’s all sealed in the most recent Concorde Agreement; however, the unofficial word is about 10 million pounds.

And that’s 10 million pounds that will vanish if the team settles and changes its name to something else. Changing the team’s name from Lotus Racing to Team Lotus for the 2011 season does not have this implication, as apparently your team name can change, even if the constructor’s name cannot be.

In this case, Tony’s team’s constructor name is “Lotus”, while the Lotus Renault GP constructor name is “Renault”. It’s quite obvious that ceasing using the name Lotus would mean changing the constructor name, hence no 10 million pounds.

Tony even suggested that accepting the six million pound offer would bankrupt his team. Now, before you say anything, this situation probably goes beyond the simple calculation of “six million pounds is less than 10 million pounds.”

Some of the money that the team currently has is probably very much to do with the fact that the team is named Lotus and comes packaged with a long glorious history. When a watch brand ties up with an F1 team they’ll want to have something fancy to say in their co-branding ads, and a one-season old team with a name like Air Asia F1 or Tune F1 isn’t going to be very appealing to sponsors. Apparel maker Hackett is no longer a sponsor for Team Lotus this year.

So what’s Tony’s idea of a fair sum for an out of court settlement? Proton’s Datuk Syed Zainal reveals that Tony was asking for between 22 million to 37 million pounds in November last year, which included the purchase of the name “Team Lotus” (which he had just bought from David Hunt) for five million pounds.

Minus the five million pounds for the name, and the remainder of the amount was supposed to cover various indirect costs like new brand development, loss of income from already produced merchandise, loss of sponsorship, etc.

Before it all fell apart… but what’s done is done.

According to Syed Zainal, it was unjustifiable for Tony’s 1Malaysia Racing Team to demand Group Lotus and Proton to compensate them for a problem which 1MRT got themselves into, and that Group Lotus cannot be made liable for the “commercial misadventure” that could have been avoided. Thus the proposed settlement was only for the purchase price of the Team Lotus name, subject to due diligence.

He added that 1MRT entered into a relationship with David Hunt’s Team Lotus Ventures with full prior knowledge that Group Lotus has been in a long standing legal dispute with Hunt’s company. Furthermore, the original Lotus Racing name licensing agreement stipulates that 1MRT cannot associate itself with Lotus or use the name Lotus if the agreement was terminated.

If you’ve been following the saga unfold so far, Tony has all along insisted that the grounds for termination of the Lotus Racing name licensing agreement by Group Lotus/Proton was unjustified, and was terminated over “some T-shirts”. This is in fact the basis of one of the court cases going on between the two parties – that the termination of the agreement was unlawful.

Syed Zainal says 1MRT could have easily remedied the breaches and continued with the “Lotus Racing” name this year if it was due to merchandising as claimed – which leads me to wonder if it was really about T-shirts after all. Proton’s own reason in the initial press release announcing the revocation of the brand licensing was “flagrant and persistent breaches of the licence which were damaging to the Lotus brand.”

Sounds like the inside story is much more complicated, even coming down to some alleging that Tony and his partners originally wanted to orchestrate a takeover of Group Lotus from Proton after proving their worth in F1. In any case, many have already aired their views on the whole row, including Lotus Renault GP team owner Gerard Lopez.

Group Lotus and Proton say they continue to hold the view that this matter should be resolved soon in the interest of F1 and the fans, and will remain open to reasonable and justified proposals to settle out of court. Right now they are only willing to pay for the name. Otherwise, we’ll see what happens in March in the UK courts.