Judge Rules IndyCar Champion Alex Palou Owes McLaren $12 Million

Alex Palou has been ordered to pay McLaren $12 million in damages for breach of contract by a judge in a United Kingdom Commercial Court in London. The ruling was announced in London on Friday, January 23.

However, the judge ruled in Palou’s favor for the amount McLaren sought in damages to its Formula 1 team and payment of legal fees. The ruling by the judge is focused on damages on Palou breaching his contract to race for McLaren starting in 2024.

McLaren had originally sought $30 million in damages, but it was later reduced to $20.7 million. That was for damages allegedly lost in sponsorship, driver salaries and performance earnings.

Friday’s ruling was Palou’s liability was $12 million for damages involving the Arrow McLaren IndyCar team. Palou breached his contract when he said he would not honor the agreement that would have begun in 2024.

Details On The Decision

The damages awarded to McLaren were tied to loss of sponsorship. Palou was ordered to pay $5.3 million to cover the losses in the team’s agreement with NTT Data, $2.5 million in “other IndyCar sponsorship revenue” and $2 million in performance-based revenue.

“The court has dismissed in their entirety McLaren’s Formula One claims against me which once stood at almost $15 million,” Palou said in a statement. “I would like to thank Otmar Szafnauer for his expert assistance.

“The court’s decision shows the claims against me were completely overblown. It’s disappointing that so much time and cost was spent fighting these claims, some of which the Court found had no value, simply because I chose not to drive for McLaren after I learned they wouldn’t be able to give me an F1 drive.”

The court ruled that Palou was liable for damages by not honoring a contract to drive with the Arrow McLaren IndyCar team. Originally, that would have begun in 2024, but Palou notified McLaren he would remain with Chip Ganassi Racing. The judge ruled that Palou is responsible for $12 million in damages.

Palou Considers Additional Options

“I’m disappointed that any damages have been awarded to McLaren,” Palou said. “They have not suffered any loss because of what they have gained from the driver who replaced me.

“I am considering my options with my advisors and have no further comments to make at this stage.

“I look forward to the upcoming season with Chip Ganassi Racing.”

Chip Ganassi Remains Committed to Palou

Team owner Chip Ganassi continues the team’s full support to the star driver as the legal saga continues.

“Alex has our full support, now and always,” Ganassi said. “We know the character of our driver and the strength of our team, and nothing changes that. While we respect the legal process, our focus is exactly where it should be on racing, on winning, and on doing what this organization has always done best, competing at the highest level.

“We are locked in on chasing another NTT IndyCar Car Series championship and defending our 2025 Indianapolis 500 victory. That’s where our energy is, and that’s where Alex’s focus is, on the track, doing what he does best: winning.”

How It Came To This Point

Palou originally signed with McLaren’s IndyCar team in 2022 beginning with the 2023 season. Ganassi enforced the option year on Palou’s contract and through mediation, Palou returned for 2023 while serving as a reserve and test driver for McLaren’s F1 team in 2023.

But when McLaren signed Oscar Piastri for its F1 team, and Palou was on his way to the first of his three-straight NTT IndyCar Series Championships in 2024, the driver informed McLaren he would not be honoring the contract.

Since then, Palou has become IndyCar’s most dominant driver with four NTT IndyCar Series Championships, including the last three in a row. In 2025, he won eight of the 17 races including the 109^th Indianapolis 500.

McLaren Reaction

In a sense, both sides could claim victory in this legal matter, because Palou is still responsible to pay McLaren $12 million in damages for breaking his contract with the Arrow McLaren IndyCar team.

“This is an entirely appropriate result for McLaren Racing. As the ruling shows, we clearly demonstrated that we fulfilled every single contractual obligation towards Alex and fully honored what had been agreed,” said McLaren Racing CEO Zak Brown. “We thank the court for recognizing the very significant commercial impact and disruption our business suffered as a result of Alex’s breach of contract with the team.”