The recent decision by Adidas to prematurely end its sponsorship deal with the International Association of Athletics Federations (IAAF) has thrown the spotlight on the legal issues associated with sponsorship termination.
The sporting goods giant asked to be released from its 11-year sponsorship contract with the IAAF after media allegations and a World Anti-Doping Agency report laid bare the failure of the systems of the athletics’ world governing body in tackling corruption and doping undertaken by Russian athletes.
Adidas cited its “clear anti-doping policy” as grounds for seeking to terminate the $3 million (£2.1 million) deal four years prior to the originally agreed 2019 end date.
In an interview with Sky News – Ian King Live, Charles Russell Speechlys Partner Jon Walters commented:
"From our experience with contracts of this type, you'll have two types of termination clause. You'll have the general one, that will deal with disrepute more generally, and I think that's likely to be where Adidas might be looking in this case...they'll be saying that the conduct of the IAAF, with the corruption and doping scandals, has brought disrepute on Adidas, and therefore they can terminate.
"There might also be more specific rights which can deal with the particular issues of doping and corruption, and I think if Adidas had done their due diligence on athletics back in 2008 when they entered into the sponsorship deal, they would have known that there might have been issues in that area, so they may have looked to put specific clauses in about good governance and about doping that they might point to."
While the IAAF has stated it does not expect to lose money should the split with Adidas occur (thanks to the deal being underwritten by commercial partner Dentsu), it will be concerned as to the financial sting of the departure if it has a knock on effect with other sponsors.
At this stage, it is unclear if any other sponsors will express the desire to be released from their own sponsorship deals (camera manufacturer Canon has already denied it intends to do so), however it is clear is that the IAAF will have to navigate the related legal waters with extreme caution.
Speaking with The Times, Jon said:
“If the IAAF accept that Adidas are going and they can’t stop them, they will want to make sure that however that is framed it doesn’t give their other sponsors the right to go.”