International Law

Uncertainty in these Troubled Times

By Stan

Every once in a while, you get an opportunity to consider what effect the downturn will have on certain industries and specific transactions. This is in addition to some of the more personal incidents that occur (e.g. people you know that have lost jobs, lost homes, are freaking out generally, etc.).

Case in point today. I have been working on a sports event that will take place this later this year in Beijing. My firm represents the foreign party, which is cooperating with various groups here, government and private. Some of the commercial work includes a master event license agreement and a bunch of other sub-agreements that cover certain aspects of the event, such as IP licensing, sponsorships, merchandising, and so on.

I was reviewing the latest changes to one of these documents today, which included language dealing with international sponsorships, when I started thinking about issues related to the global meltdown. Some of these sponsors are from countries that have bailed out struggling enterprises, and in at least two countries that I know about (U.S. and UK), these bailouts have come with strings attached.

So far, these conditions usually involve executive compensation. While I have heard criticism in the U.S. about marketing expenditures of these companies (including stadium and event sponsorships), we have not reached the point where any government is challenging these line items.

But it certainly could happen, couldn’t it? As an international commercial lawyer, I don’t much care either way about such a policy. If this type of scrutiny occurs in the future, it might mean one more thing for me to worry about when vetting these kinds of deals. Another bit of due diligence to take care of.

Come to think of it, the responsibility for this sort of thing will have to rest squarely on the sponsors themselves. Perhaps government interference of this kind will have to be expressly noted in a list of warranties, with risk of default if the government gets involved being insured by the sponsor. In other words, this is something that my client should not have to worry about, at least from a financial standpoint. Still, though, an interesting political/legal issue.

Perhaps I’m being too paranoid. On the other hand, just this weekend, some prominent U.S. Republican politicians suggested that Washington may need to nationalize some large American banks. So, questioning high-profile sports sponsorships? That is definitely something I can see a government doing.

Full post as published by China Hearsay on February 16, 2009 (boomark / email).