By Alan Baldwin

SILVERSTONE, England (Reuters) - Mercedes drivers Lewis Hamilton and Nico Rosberg will remain free to race each other for the Formula One world championship despite their costly last lap collision in Austria, the team said on Thursday.

So-called 'team orders, with drivers told not to pass after a certain point of the race, could still be imposed as a last resort if they failed to respect strengthened 'Rules of Engagement'.

Rosberg leads Hamilton by 11 points after nine of 21 races.

"Our drivers were informed that they remain free to race for the world championship," Mercedes said in a statement at the British Grand Prix.

"We believe this is the essence of Formula One, including between team mates. As passionate racers, we want to see them racing, and so do the fans of Formula One."

Triple world champion Hamilton won at the Red Bull Ring last weekend, with Rosberg finishing fourth in a damaged car.

The title rivals had been nose-to-tail going into the final lap, colliding when Hamilton went round the outside of the German at turn two.

Mercedes said the continued freedom to race put the onus on drivers "to respect the values of the team" which had lost more than 50 points in the constructors' championship as a result of three such incidents in five races.

The revised 'Rules of Engagement' would include "greater deterrents to contact between our cars," the team said.

A spokesman said the details would remain private. Media speculation has focused on the possibility of heavy fines, for drivers paid many millions, or even suspension.

"With these in place, we will trust our drivers to manage the situation between them on track. Their destiny is in their own hands," said the statement, adding that the team still had full belief in the pairing.

Between them, they have won 43 races since 2013.

Mercedes added that the team could still issue instructions during the race "to protect against a potential loss of constructors’ points" as they did in Monaco when Rosberg was slower and told to let Hamilton pass.

Mercedes said the drivers had held "positive talks" with team bosses Toto Wolff and Paddy Lowe at the factory on Thursday morning.

The team's non-executive chairman Niki Lauda, who retracted on Wednesday comments he made about Hamilton allegedly trashing his room at a race in Azerbaijan last month and lying about his relationship with Rosberg, was not present.

(Reporting by Alan Baldwin, editing by Ken Ferris and Clare Lovell)