Schumacher said he was 'shocked and disappointed' at the decision. Asked whether he intended to complete the season, he said: 'I will not make any decisions right now. I need a few days to think about a lot of things and when it is time to make a decision I will let you know. But for the moment nothing has changed for me.'
If the sport's governing body, the FIA, confirm his disqualification for alleged technical infringements in Sunday's Belgian Grand Prix, where he was first across the line, and Hill wins the next two races, Schumacher will have only a one- point lead when he returns to the track for the final three races.
Benetton said: 'We are disappointed with the decision. The team contends, as it has all along, that while mistakes were made, the penalty has been too harsh.'
Flavio Briatore, their managing director, added: 'We will now concentrate on the next two grands prix, in which we will race cars driven by J J Lehto and Jos Verstappen. We look forward to Michael's return at Jerez (Spain) to continue his world title pursuit.'
It is thought that another hearing, to consider the removal of a filter from refuelling equipment by Benetton at the German Grand Prix last month, may threaten the team's standing in the constructors' championship rather than that of their No 1 driver.
Schumacher's campaign is now in near-disarray. Benetton withdrew their appeal against a dollars 500,000 ( pounds 330,000) fine for their part in the Silverstone fiasco, hoping to help his cause.
Schumacher admitted he and his team had made mistakes at Silverstone but claimed the penalty was too severe. He pointed out that the organisers had also been at fault - hence the withdrawal of the clerk of the course's licence for one year.
However, the International Court of Appeal, sitting in Paris, rejected Schumacher's case. In a statement, the FIA announced: 'After hearing all parties, the International Court of Appeal could find no evidence, nor new evidence, to justify a change to the decisions taken by the World Motor Sport Council. . . the International Court of Appeal confirmed the decisions taken by the World Motor Sport Council at its meeting of 26 July 1994 to exclude the driver of car No 5, Michael Schumacher, from the result of the 1994 British Grand Prix and impose on him a two-race suspension with immediate effect.'
Schumacher now faces a tense struggle in the Grand Prix of Europe, at Jerez, and in Japan and Australia. In those races he will confront not only Hill but also Nigel Mansell, whose return for these events was confirmed yesterday by Williams-Renault.
Frank Williams, team principal of Williams, said last night: 'Nobody wants to benefit from other people's misfortune, but obviously this ban will help us and Damon in the battle for the championship. It is up to us to make the most of the next two races.'
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