The international jury have upheld the protest by Team New Zealand and Luna Rossa over moves to alter the America's Cup class rule just a week out from the start of competition.
The two teams complained regatta director Iain Murray had exceeded his authority by attempting to invoke new rudder regulations as part of the sweeping new safety measures introduced in the wake of the death of Artemis crewman Andrew Simpson.
Murray argued the changes are necessary to run a safe regatta and are in line with the rules of the event.
After a week weighing up the submissions from the teams and race management, including an oral hearing on Wednesday, the international jury decided in favour of the Kiwis and Italians.
Given the new rudder specifications form part of the 37 recommendations he put to Coastguard authorities in his application for a marine event permit, Murray said should the jury rule in favour of Team New Zealand, he must go back to the Coastguard and notify them of the changes to his safety plan and provide them with an assessment of the overall safety of the event.
Murray said last week he wouldn't be able to give a favourable answer.
"I can't stand by and honestly tell them with my hand on my heart...that the rules have changed, and this is safe," said Murray.
"A discussion will have to take place whether the permit to race stands or it doesn't stand. Without a permit to race on San Francisco Bay, there will be no regatta."
In a statement Emirates Team New Zealand managing director Grant Dalton said he was "pleased the jury has maintained the sanctity of the AC72 Class Rule in ruling that it can be changed only by unanimous consent of the competitors and the Regatta Director".
"We believe the jury's decision does not affect the substance of the safety plan submitted with the application to the US Coast Guard for a Marine Event Permit or the excellent work the Regatta Director undertook with the Review Committee. Most of the 37 safety recommendations have become rules by amendments to the Protocol and the Racing Rules of sailing," Dalton said.
Dalton said Team New Zealand has been fully compliant with all 37 safety recommendations in its two races to date in San Francisco. Luna Rossa will be compliant when it races today and Oracle has said that it will be ready to race on September 7 no matter what the rules are.
Artemis Racing is the only team to have said it cannot comply with both the Class Rule and the safety recommendations.
As reported by the Herald yesterday, Team New Zealand has proposed a dispensation from the Class Rule to allow Artemis Racing to compete.
Later this morning Luna Rossa will race for the first time after sitting out their opening race against Team New Zealand through protest. However with the race meant to be against Artemis they will go around the course solo.
The first actual race of the Louis Vuitton Cup will take place between Team New Zealand and Luna Rosa on Sunday (NZT).