America's Cup: Team Australia pull out of the running for the 35th America's Cup to deliver the latest major blow to possible 2017 race

Hamilton Island Yacht Club announce that they will not participate in the next running of the America's Cup, expected to be held in three years time

Team Australia's new AC45 catamaran speeds over the water during its first outing on Sydney Harbour (Getty Images)

Another major wobble in the progress towards the next America’s Cup came overnight with the announcement in Australia that the lead challenger, Hamilton Island Yacht Club’s Team Australia, has decided to pull out after, as Challenger of Record, it had negotiated to rules protocol for the next event, expected to be in 2017.

The Australians have a proud America’s Cup history and took the cup away from the United States in 1983 after the Americans had held it for 152 years. At the time the prime minister Bob Hawke said every Australian employer should give time off for the celebration and the subsequent, unsuccessful, defence in Fremantle, W. Australia, is still remembered as one of the best ever staged.

The defending San Francisco-based Oracle Racing Team, along with the Golden Gate Yacht Club, said: “The America’s Cup organizers have received notification from the principals of Hamilton Island Yacht Club of their intention to withdraw Team Australia from the 35th America’s Cup.

“We are very disappointed to be receiving this news,” said Russell Coutts, director of the America’s Cup Event Authority (ACEA). “We were excited to have Australia as a challenger and we were also looking forward to the prospect of holding America’s Cup World Series events in Australia.

“But our focus going forward is with the teams that have already submitted challenges and the teams that have told us of their intent to do so before the entry deadline on August 8th.”

In the meantime, ACEA is continuing its work to select a host venue for the America’s Cup in 2017. The selection process “is progressing well” with an aim to announce the final venue in October. ACEA says that the final two being considered are San Diego, California, and Bermuda. At a meeting last weekend in Los Angeles, apparently under the auspices of HIYC but given significant impetus from Ben Ainslie, considerable reservations were express by all the attending actual and putative challengers about both venues.

Ben Ainslie Racing (BAR), which revealed its America’s Cup team in a gala ceremony in London last month, was quoted as saying: “We remain supportive of the defender’s continued drive towards a more commercial event format, along with a more sustainable future for this historic trophy.

“BAR will be bidding to host two America’s Cup World Series events in 2015/16 at our new home in Portsmouth; as a key part of the road to the 35th America’s Cup. While the withdrawal of the Challenger of Record is regrettable, it is also not unusual and we will continue our own preparations for the 35th America’s Cup and look forward to an exciting future.”

Commenting on the decision not to proceed with the challenge, Sandy Oatley, son of the Australia Team’s founder Bob, said: “When we entered the cup we had the intention of trying to change the cup in many ways. Our position as Challenger of Record gave us the opportunity, through the drafting of the protocol, to affect this change. Central to these changes, was the desire to make the participation in the Cup more affordable and more sustainable.” There are, however, also understood to be some family reservations about the extent of any financial commitment.

Bob Oatley said: “The challenge was initiated with a view to negotiating a format for the 35th America’s Cup that was affordable and put the emphasis back on sailing skills. Ultimately our estimate of the costs of competing were well beyond our initial expectation and our ability to make the formula of our investment and other commercial support add up. We are bitterly disappointed that this emerging team of fine young Australian sailors will not be able to compete at the next America’s Cup under our banner”.

It is understood that Team Australia will continue to provide the crew for the GAC Pindar challenge for the 2014 Extreme Sailing Series with Nathan Wilmot continuing as skipper for the next regatta in Cardiff next month.

The challenges referred to by Sir Russell are believed to refer to those already lodged by Torbjorn Tornqvist’s Swedish Artemis team, now headed by Britain’s Iain Percy, and the Prada backed Italian team, Luna Rossa, skippered by Max Sirena with Britain’s Chris Draper again taking a major role.

The ACEA organization says it has agreed not to name challengers until the deadline on 8 August. It is not clear whether either would take over as Challenger of Record, but the system says that the first of the two to challenge would take over the role. Both have carried out the task in the past.

Emirates Team New Zealand CEO Grant Dalton said he was disappointed to see the Australian syndicate pull out but said the Kiwi team was on track."We have the class rule and the design team is well into its programme.

“The sailing team continues to compete successfully overseas, with great recent results by Dean Barker and Glenn Ashby in the A class cats worlds and Peter Burling and Blair Tuke still dominating the 49er scene," said Dalton. "In addition, we have never been in better shape with potential sponsors."