America's Cup host Team New Zealand (TNZ) expressed outrage Thursday at a ruling they say will hinder efforts to showcase Auckland to the world during the prestigious sailing regatta.

The event next year had promised to feature huge foiling catamarans competing at high speeds close to the Auckland coast -- offering spectators the chance to see tacking duels from the shore and TV broadcasters shots of racing with a city backdrop.

But after a complaint from Italian rival Luna Rossa, the America's Cup arbitration panel has ruled that the two racing courses closest to land cannot be used because all competitors will not have equal access to them.

Four alternative courses, all further out to sea, must be used for the regatta -- which will see challengers compete for the Prada Cup in January-February, with the winner then racing TNZ for the America's Cup in March.

Holder TNZ said ditching the inner harbour courses "destroys one of the most exciting benefits of the America's Cup event for the people of Auckland and visitors from throughout New Zealand".

It denied Luna Rossa's argument that using the courses gave the host a competitive advantage and said scrapping them impaired public accessability and racing safety.

"Quite frankly we are outraged by this decision, it has gone against everything we have been trying to achieve over the last three years," TNZ chief Grant Dalton said.

Italian team Luna Rossa's AC75 America's Cup yacht in Auckland
Italian team Luna Rossa's AC75 America's Cup yacht in Auckland LUNA ROSSA PRADA PIRELLI TEAM / Handout

Dalton said TNZ was considering options to overturn the "unbelievable" ruling.

TNZ, a privately owned racing syndicate, won hosting rights for the 2021 America's Cup when it triumphed in Bermuda in 2017.

The New Zealand government and Auckland Council have poured a combined total of around NZ$250 million ($166 million) into the America's Cup, which dates back to 1851.

There has already been grumblings about committing such a large amount of public money to a yacht race in the midst of a global pandemic, and they are likely to intensify if Auckland's ability to gain global exposure is compromised.

The America's Cup yachts feature foil arms, which lift the hull above the surface of the water to reduce drag, giving the impression they are flying through the air.

The AC75 design for Auckland 2021 features a 23-metre (75-foot) monohull, rather than the 15-metre foiling catamarans used in Bermuda.

The three confirmed challengers are Luna Rossa (ITA), American Magic (USA) and INEOS Team UK (GBR).

Another US syndicate, Stars & Stripes Team USA, has said it intends to race but its participation is not yet confirmed.