Schumacher was suspended for two races and had deducted the six points he earned for second place in the British Grand Prix, early this month, for ignoring the black flag during that race. His team, Benetton-Ford, were fined dollars 500,000 (pounds 334,000) for their part and the organisers, the RAC were ordered to launch a full inquiry.
The German driver is likely to appeal, enabling him to appear in his home grand prix, at Hockenheim, on Sunday, but if the ruling of FIA's World Council is upheld, he will miss the races in Hungary and Belgium. Should Hill take full advantage he would then advance to within touching distance of Schumacher.
The Williams-Renault driver, trailing by 33 points, was released to pursue what had seemed a lost cause when the Paris hearing cleared him of any offence in taking a Union flag on his slowing down lap after winning at Silverstone. Williams submitted evidence proving he did not stop, as was alleged.
If Hill beats Schumacher into second place at Hockenheim and wins the following two races, the pair will resume their duel in the Italian Grand Prix, at Monza (assuming that venue remains on the tour) on 11 September, separated by only three points.
Schumacher, who along with his team was severely reprimanded and fined dollars 25,000 by the Silverstone stewards, left yesterday's hearing close to tears, declining to comment.
Max Mosley, president of FIA, and his colleagues dismissed Schumacher's defence that he could not see the black flag, which indicated he should return to the pits for a stop and go penalty, because of the sun. Mosley said: 'I can understand a driver not seeing the flag but then it's up to his team to tell him on the radio to come in by the next lap.'
Schumacher and Benetton will presumably fight this ruling - Benetton said yesterday they would take 24 hours to consider their position. Despite their six victories from eight races, they fear Hill and Williams are gathering momentum and the power circuits to come are likely to favour the latter combination.
The catalogue of calamities for Schumacher and Benetton began when the 25-year-old driver darted ahead of Hill, the pole-position holder, at the start of the parade lap before the British Grand Prix. He repeated the illegal manoeuvre before they settled in their required order on the grid.
Schumacher consequently incurred the stop and go penalty but did not respond to the black flag as officials of Benetton debated the matter with the organisers. Eventually Schumacher did come into the pits and, in so doing, yielded control of the race to Hill. The stewards of the meeting subsequently decided against disqualifying Schumacher and now the organisers have been asked to explain themselves. The director of the race, Pierre Aumonier, has lost his licence for a year and the RAC have been instructed to investigate events.
The RAC spokesman, Colin Wilson, insisted: 'Everything was run according to the rule book. It is hard to tell if this is an indictment, because the FIA don't specify what the incidents were.
'First of all we want to seek clarification from the FIA as to what they consider we did wrong, what they have convicted us of. If it is serious, we will look into it, but we do have the right of appeal.'
Wilson said the RAC would not comment until it had the results of the inquiry it was conducting.
Two other drivers, Mika Hakkinen, and Rubens Barrichello, who collided at the final corner, each received a suspended one-race ban. Their bans will be lifted if they stay out of trouble for the next three races.
Benetton have been fined a further dollars 100,000 for failing to make computer source codes available to officials after a challenge to the electronic systems on Schumacher's car at the San Marino Grand Prix. An identical fine was imposed on McLaren for the same reason.
THE FIA PUNISHMENT FOR SCHUMACHER AND BENETTON
Schumacher banned for two grands prix
Schumacher and Benetton deducted the six points assigned for finishing second in the British GP
Benetton fined dollars 500,000