Entering the weekend, Michael Schumacher led the World Drivers' Championship with 44 points, having won four of the first five races of the season. Despite his dominant form, Schumacher had never won the Austrian Grand Prix in four previous attempts. He expressed confidence before the race, noting that while the team had a competitive package, victory would depend on the performance of their rivals.
During qualifying, Rubens Barrichello secured pole position with a lap of 1 minute, 8.082 seconds. Michael Schumacher qualified third, citing a brake problem and traffic that slowed his progress. This marked the first time in eight races, dating back to the 2001 Italian Grand Prix, that Schumacher had not earned a front-row start.
The race began with Barrichello maintaining the lead into the first turn. Michael Schumacher moved into second place, and the two Ferrari drivers began to pull away from the rest of the field. By lap 10, Barrichello held a one-second lead over Schumacher, who was 17 seconds ahead of the third-placed Ralf Schumacher.
The race was interrupted by two safety car deployments. The first occurred on lap 24 when Olivier Panis' engine seized on the start/finish straight. During this period, Ferrari employed a two-stop strategy, calling both drivers into the pit lane. Schumacher drove more slowly than Barrichello to allow mechanics to service Barrichello's car first.
A second safety car was deployed on lap 28 following a major accident. Nick Heidfeld noticed smoke from Alex Yoong's car and applied his cold brakes heavily, locking his rear wheels and sending his Sauber out of control at approximately 280 km/h (170 mph). Heidfeld's car spun across the grass and struck the side of Takuma Sato's Jordan. The 47G impact caused heavy damage, with Heidfeld's car puncturing a hole in Sato's monocoque. Despite the severity of the crash, which required ten minutes to extricate Sato from his vehicle, both drivers sustained only minor injuries—Heidfeld a bruised left leg and Sato soft-tissue damage to his right thigh. Both were cleared to race in the following round at Monaco.
On lap 63, Ferrari team principal Jean Todt invoked team orders, instructing Barrichello to relinquish the victory to Michael Schumacher to improve Schumacher's standing in the World Drivers' Championship. Barrichello radioed Todt to remind him of a promise made after the 2001 race not to relinquish a victory, but Todt insisted he obey to preserve Ferrari's "best interests." In a 2012 interview, Barrichello stated that he was faced with "a form of threat that made [him] think about re-thinking [his] life, because the great joy for [him] was driving."
As the cars entered the final corner of the final lap, Barrichello braked in the final 50 to 100 yards to comply with the instruction. Michael Schumacher passed him to take the win by 0.182 seconds. The crowd in parc fermé and at the podium responded with boos, jeers, and whistles.
During the podium ceremony, Michael Schumacher implored Barrichello to mount the first-place stand and gave the winner's trophy to his teammate. While the FIA established that team orders were allowed at the time, this breach of podium protocol and the manner in which the race ended led to disciplinary action.
The immediate aftermath saw widespread condemnation from the international press and fans. On 26 June 2002, the FIA World Motor Sport Council met in Paris. The council determined that Ferrari had not violated regulations by using team orders, but found the team and drivers in transgression of regulations regarding the podium ceremony.
A fine of $1 million was imposed on Ferrari, Michael Schumacher, and Rubens Barrichello. Each paid a third of the fine immediately, while the remaining $500,000 was suspended for one year on the condition that no similar offence occurred.
The 2002 Austrian Grand Prix fundamentally altered Formula One regulations. Following a review and public consultation, the FIA confirmed on 28 October 2002 that "team orders that interfere with the race result" would be barred starting with the 2003 season. This ban remained in place until after the 2010 season, when it was rescinded because the practice was deemed difficult to enforce against coded messages.
In later years, Ferrari leadership expressed regret over the decision. In 2010, Jean Todt admitted he should have avoided the order, as he subsequently believed Schumacher would have won the championship without it. In 2017, Ross Brawn called the incident a mistake on reflection, noting that the negative consequences for Formula One outweighed the positives. Michael Schumacher's victory in the race was the 58th of his career and his fourth in a row during the 2002 season.
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