The latest developments in the long-running legal dispute between IndyCar star Alex Palou and McLaren Racing came to a head in January 2026, when London’s High Court ruled that Palou must pay the team more than $12 million in damages for breach of contract. The decision, handed down on January 23, 2026, followed a five-week trial in late 2025 and marked a partial victory for McLaren, though far less than the original $30 million (later reduced to around $20.7 million) the team had sought. Palou, a four-time IndyCar Series champion (2021, 2023, 2024, and 2025), has expressed deep disappointment with the outcome, describing the ordeal as personally and emotionally taxing while maintaining that McLaren’s claims were exaggerated.
The saga traces back to October 2022, when Palou, fresh off his breakthrough 2021 IndyCar title with Chip Ganassi Racing, signed agreements with McLaren. The deal positioned him as McLaren’s Formula 1 reserve and test driver in 2023, with plans for him to join Arrow McLaren—the team’s IndyCar operation—in 2024, 2025, and 2026. Palou viewed the arrangement as a potential pathway to Formula 1, a dream he had long pursued. However, tensions arose when it became clear that a full-time F1 seat was not forthcoming. McLaren signed Oscar Piastri for its F1 program, and Palou felt the promises made to him were not materializing as expected.
In 2023, amid a dominant summer stretch that included multiple wins, Palou chose to extend his commitment to Chip Ganassi Racing instead of honoring the McLaren contract. He publicly claimed that certain aspects of the agreement had been misrepresented, including the likelihood of an F1 opportunity. McLaren responded by filing a lawsuit in the UK, alleging breach of contract and seeking compensation for lost sponsorship revenue, driver salary adjustments, performance-based earnings, and other commercial impacts. The case centered on the fallout from Palou’s decision to stay with Ganassi, where he continued his remarkable success, clinching three consecutive championships and securing a landmark Indianapolis 500 victory in 2025.
The court’s ruling awarded McLaren damages primarily tied to its IndyCar operations. These included approximately $1.3 million for driver salary commitments, over $5 million related to losses from a renegotiated sponsorship deal with NTT Data (a sponsor that had moved to Arrow McLaren expecting Palou’s arrival but later departed), around $500,000 from General Motors-related impacts, at least $2 million in other sponsorship shortfalls, and $2 million in lost performance revenue. Notably, the judge dismissed McLaren’s claims for Formula 1-related losses—once
The court’s ruling awarded McLaren damages primarily tied to its IndyCar operations. These included approximately $1.3 million for driver salary commitments, over $5 million related to losses from a renegotiated sponsorship deal with NTT Data (a sponsor that had moved to Arrow McLaren expecting Palou’s arrival but later departed), around $500,000 from General Motors-related impacts, at least $2 million in other sponsorship shortfalls, and $2 million in lost performance revenue. Notably, the judge dismissed McLaren’s claims for Formula 1-related losses—once
