“The teams cannot continue to compromise on the fundamental values of the sport, and have declined to alter their original conditional entries to the 2010 World Championship,” said the statement of the association.

According to FOTA, the new racing series “will have transparent governance, one set of regulations, encourage more entrants and listen to the wishes of the fans, including offering lower prices for spectators worldwide, partners and other important stakeholders.”

The FIA has been unable to reach an agreement with the Formula One Teams Association (FOTA) on the new cost-cutting procedures.

FIA president Max Mosley has been keen on proposing a voluntary $60 million budget cap for the participants.

“The actions of FOTA as a whole, and Ferrari in particular, amount to serious violations of law including willful interference with contractual relations, direct breaches of Ferrari's legal obligations and a grave violation of competition law. The FIA will be issuing legal proceedings without delay,” statement at FIA website said. “Preparations for the 2010 FIA Formula One World Championship continue but publication of the final 2010 entry list will be put on hold while the FIA asserts its legal rights.”

As it stands, Williams and Force India will be the only current teams on the starting grid next season. They'll be joined by three new outfits – Campos Racing, Team US F1 and Manor F1.