Manchester United ending Aeroflot relationship shows importance of reputation clauses in sponsorship agreements

In light of the Russian invasion of Ukraine, Manchester United has taken the swift decision to end its relationship with the Russian (part) State-owned airline, Aeroflot.

Manchester United has been renowned over the past decade or more as a model for football clubs exploiting commercial revenues through a plethora of sponsorship deals and commercial partnerships across all sectors, including appointing "official partners" in sectors ranging from "tyres" to "wine" and even, famously "noodles". Aeroflot had been United's official carrier since 2013 and, as well as being the official airline for transporting the squad and staff internationally, the Russian airline had enjoyed a range of incredibly valuable sponsorship rights. The exact value of the deal is not publicly known but is undoubtedly in the tens of millions of pounds per annum, and given it has lasted almost a decade, likely exceeds £100m.

Despite the apparent success of the partnership, it has ended swiftly and publicly with United cutting ties by way of a short, pointed, press release after taking an immediate decision not to use Aeroflot for the club's midweek trip to Madrid for a European fixture. For a global brand as prominent and valuable as Manchester United it is simply not tenable to continue to associate with and support a Russian state-owned business at this time. 

Herein lies the value of the "morals" or "reputation" clause in any sponsorship agreement. Any major brand worth its salt will include such a clause in all its partner agreements, to ensure that where any continued association with the sponsor would (or in some cases would be likely to, in the brand's reasonable assessment) damage or harm the brand's reputation, then it will have the right to walk away from the contract.

Whether such an occurrence is framed as a termination "for fault" or not (and therefore the ensuing impact on payment or refund of sponsorship fees etc.) will depend on the particular drafting of the contract, but for the brand it crucially offers a swift (and very public) exit from the relationship without argument or delay. From a brand's perspective, this is the most important thing, allowing it to make the kind of public statement we have seen from Manchester United, cutting all ties and distancing itself from the sponsor. Of course, these clauses may well also apply in reverse, depending on the nature and bargaining power of the parties and the deal at hand. 

It is important in this case also to highlight that in this case the trigger was not an act of Aeroflot as a company/contracting party itself, rather it was an act of a (technically) third party, i.e. the Russian state. These clauses are often drafted so as not to necessarily require the fault of the contracting party, but simply that the continued association would be damaging to the brand of the other. Back in 2012/13, when the deal was signed, the exact reasons why or circumstances in which this clause may have been triggered would not have been known, but the value in ensuring such a provision was included is clear to see.