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Sponsorship agreements, reputation protection and unwelcome po-litical messages

The World Cup in Qatar, which is generally regarded as controversial, throws light on a topic that has recurred in various shades quite frequently in recent times: How does a sponsor of an event, a person or a media production deal with situations where the political stance or the social perception of the contractual partner suddenly no longer matches the own self-image and the goals and values set for oneself? Is it possible to terminate the contract, to exert influence, or must the sponsor swallow the bitter pill and continue as before - or else bear the financial consequences?

The problem
Companies invest a lot of money and effort in their own public image and perception. The standards set for the own company are often no longer merely limited to attributes that are directly related to the products or services offered. Rather, values such as cosmopolitanism, equality, sustainability, tolerance, humanrights, the rule of law and diversity are becoming increasingly important. In some cases, such values are incorporated into the company's own codes of conduct/values or guidelines. The company's own public image is aligned with these values. In the context of this public perception, their reputation and their social prestige, companies even enjoy a certain degree of protection against negative portrayals and statements through the so called “corporate personality right”. But what happens when long-standing contractual partners, such as partners in sponsorship agreements, suddenly no longer match this self-image and the company's own values?

What can be done? ↔ Can anything be done?
The first obvious reflex seems to be to terminate the existing agreements. But is it that simple? In many cases it's probably not quite that simple. After all, from a mere formal point of view, the sponsoring partner provides its services. The placement of one's own brand on a jersey, in the course of an event or in a media production remains possible. Termination for non-fulfillment, breach of obligations or poor performance is therefore not possible in most cases. Particularly in older cases, the sponsoring agreements will sometimes neither contain wording regarding the sponsor's own values and positions nor an explicit right of termination/cancellation in the event that the political stance or social perception of the contractual partner no longer matches the sponsor's own positioning. The risk of the feasibility of the sponsoring partner's services generally lies with the sponsor. Claims for damages will often fail because the damage to reputation is difficult to quantify. Most likely there will be no possibility of influencing the content of the sponsoring partner apart from diplomatic negotiations. Was that it?

One approach can be to include one's own values, self-image and any codes of conduct into the sponsoring agreement. For example, it could be stated in the preamble that the sponsorship agreement is also intended to promote climate protection issues. Or that the sponsor stands for equal rights for men and women. The sponsor's own codes of conduct/values can be integrated into the agreement. However, this alone is not enough. The sponsorship agreement should additionally provide for loyalty/good conduct obligations on the part of the sponsoring partner, prohibit any portrayal of the sponsor that is detrimental to the sponsor and its reputation, and give an extraordinary right of termination in the event of non-compliance.

As is so often the case, a well-drafted contract helps to avoid problems. Whether a politically disagreeable positioning gives a right to dissolve the contract even in light of the aforementioned regulations, has not yet been decided by the courts. The more the positioning of the sponsoring partner contradicts the company's own values - provided these are mirrored in the sponsorship agreement - the more likely this may be the case. However, even a "breach of contract" can be an opportunity to position oneself, irrespective of any financial consequences.

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Maximilian König

Maximilian König

Senior Associate

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