The interaction between global events, politics and sport has long been evident throughout history from the boycotting of the Olympic Games in Moscow 1980 to South Africa's rugby world cup victory in 1995. As the world reacts politically, socially and economically to the invasion of Ukraine, we have again seen the ripple effects across the sporting landscape.
Sports clubs, governing bodies and sponsors have evaluated both arrangements to host major sporting events as well as contractual agreements with sponsors. For example, in recent weeks, Three has temporarily suspended its sponsorship of Chelsea, Manchester United withdrew sponsorship rights granted to the national airline of Russia, Aeroflot, UEFA moved the 2022 Champions League final from St Petersburg to Paris, and this year's Russian Formula Grand Prix was cancelled.
Before taking any action that may have future repercussions, it is necessary for parties to review and consider any rights and remedies that they may have in their contracts (as well as any applicable governing rules and regulations). Recent events also serve as a reminder of the issues to be considered when contracting for future sports events and commercial partnerships.
Postponing or moving major sporting events
With governing bodies and rightholders, such as UEFA and Formula 1, responsible for hosting events across the globe, this inevitably means operating in different countries with a range of parties and commercial partners, bringing both opportunities and potential issues in those markets.
As rightsholders, any decision by UEFA and Formula 1 to cancel or move their respective events "was likely to be reasonably straightforward" as Simon Leaf, our Head of Sport, mentioned on Talk Radio, given the strength of their "bargaining position when negotiating the hosting agreements". Greater flexibility and enhanced rights will often be available to those hosting major events. This ensures they can protect their brand, reputation and image when certain damaging situations arise. This is especially important given those hosting sports events may themselves face pressure from their own commercial partners and sponsors to respond to the relevant situation.
It will be important to review the provisions in the contract to understand what actions rightsholders are permitted to take and in what circumstances, and the relevant processes that will need to be closely followed. Additionally, they should consider any financial or legal liability that may arise from taking such action, however it is possible longer term reputation considerations may have priority over any immediate impact.
One important, and often overlooked, provision in the contract that may offer protection, depending on how it is written, is a force majeure clause. This usually sets out a list of events and circumstances which are beyond a party's reasonable control and prevent their ability to perform their obligations under the contract. For example, if a sporting event was due to be in Ukraine or Russia but can no longer practically or legally take place – this could be as a result of sanctions or a decision of the governing body – the clause may offer protection. To maximise its effectiveness, a force majeure clause should contain details about the event or circumstance (such as what is, what it covers and how long it goes on for), the consequences whilst the circumstance is ongoing and once it ends, or what happens if it does not end.
Sponsorship agreements – can you terminate or suspend your contractual relationship?
The position in relation to commercial partnerships and sponsorship agreements is likely to be significantly different from hosting sporting events. The bargaining power between the parties is typically far more evenly balanced – as a result, it may be more difficult to terminate deals. That said, UEFA has terminated its lucrative sponsorship agreement with one of Russia's largest state-run gas suppliers, Gazprom.
Commercial partnerships and sponsorship agreements should be carefully considered and negotiated to ensure that rightsholders have the appropriate contractual levers to pull and rely on (whether temporary suspension or termination rights) to protect their reputation and branding. As Simon noted in relation to UEFA ending its sponsorship agreement with Russian state-run Gazprom, "UEFA and other similar rightsholders may do more long-term damage to its relationship with its other corporate sponsors and ultimately fans by not curtailing problematic sponsorship deals".
Expressly setting out comprehensive suspension or termination rights may assist, such as in the event that reputation is (or likely to be) damaged, as well as if the relevant event cannot proceed (either as intended or at all). However, this is somewhat 'after the horse has bolted'. Greater due diligence over commercial partners and sponsors should also be undertaken prior to contracting.
The consequences of suspension or termination will also need to be carefully thought through, particularly in respect of any obligations that were ongoing at the time of suspension or termination. This could include how any marketing activations or content will need to be managed, suspended or cancelled and how the sponsor's branding, image and logo can be removed or replaced.
Final thoughts
It is vital that the contractual mechanisms that govern the relationship between rightsholders and their commercial partners and sponsors are appropriate, fit for purpose, sufficiently protect their interests and allow swift action when extreme circumstances require.
Rightsholders should be mindful that any contract safeguards against and manages the commercial, legal and reputational risks, allowing them to take appropriate action as and when needed.