Why both the Science Museum and Shell were unwise to agree to a ‘gagging’ clause

30th July 2021

Last night Channel 4 news revealed that the science museum in London had agreed to a ‘gagging’ – or non-disparagement – clause in a sponsorship agreement with Shell.

This revelation has been a reputational disaster for both parties.

Here is Greta Thunburg:

In my view, both parties deserve this flak – as it was an unwise provision to have in such an agreement.

They only have themselves to blame.

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One difference between a good contract lawyer and a wise contract lawyer is to know the difference between a provision being available for an agreement and a provision being appropriate for such an agreement.

The agreement here was a sponsorship agreement – and in the normal course of things, and as between private commercial parties, such a non-disparagement clause would be unexceptional.

Such a clause does two things.

First, it expressly regulates what a party can and cannot do.

Second, it provides an express basis for terminating a contract (or for some other legal remedy) if the provision is breached.

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In this particular case, Shell could well have ‘taken a view’  – to use a common commercial lawyers’ phrase – on the risk of whether the science museum would disparage Shell.

And if so, whether Shell would really want to rely on such an express provision in ending the sponsorship agreement.

Yes: there was a risk of disparagement – but did it really need to be dealt with on the face of the agreement?

Really?

Or was it a risk that could be better managed by other, less legalistic means?

A far greater risk – and one which was entirely foreseeable, and indeed has to come to pass – is that the clause itself would be disclosed.

Shell was contracting with a public body in a highly sensitive political and media context.

There was a strong chance – indeed a virtual certainty – that at some point the terms of the sponsorship agreement would enter the public domain.

And when this happened, that the reputational fall-out would be far worse than any disparagement that the clause itself would ever manage.

The insertion of such a clause in such an agreement was a media catastrophe in the making.

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Some lawyers may bleat that such a clause was ‘reasonable’ – and they are right insofar that such a clause would be sensible in a normal sponsorship agreement between private parties.

But the very same provision can be absolutely lacking in reasonableness in this media and policy sensitive context.

To the extent there was any serious risk of disparagement by the science museum of Shell, then Shell should have taken the view that there were far better and less legalistic means of addressing the risk.

And the science museum should in turn have insisted that there should be no clause that would limit their ability to discuss any of the issues relevant to the sponsorship.

In essence: this was not a contractual clause that Shell should have insisted on.

And it certainly one to which the science museum should not have agreed.

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14 thoughts on “Why both the Science Museum and Shell were unwise to agree to a ‘gagging’ clause”

  1. I would have thought that it would have been far wiser to simply insert some sort of ‘cover all’ ‘reputational risk’ clause which I understand are fairly common in many contracts.

  2. You have taken an entirely logical position, but in the current ‘climate’ anything goes, money talks and there are no consequences beyond a bit of adverse publicity.

  3. One of the reasons it is daft (apologies, not a legalistic phrase) is that it puts the thought in one’s mind that Shell must have some skeletons in the closet that the Science Museum might dust down and display.

    It’s really a version of the argument that politicians use so often: “you don’t need to worry if you’ve nothing to hide”.

    As the RNLI sees donations increase, the Science Museum may see theirs reduce.

  4. Out of interest, what do you mean by “better and less legalistic means of addressing the risk”? Coming from a position of ignorance on such matters, I imagine there could have been a clause to allow Shell to leave the arrangement (2nd goal of current clause) without the perception of “gagging” the science museum (1st goal)? And then it’s a matter of managing the relationship outside of the contract? But one could argue that ultimately, such a strategy has the same effect of disincentivising the museum from criticising Shell anyway, and that the two parties would struggle with PR whatever their relationship.

    1. Doesn’t that rather beg the question by assuming a tension between the aims and functions of the two organisations?

      There is good historical reason to think that the relationship would face critical examination, and Shell knows that all of their PR efforts attract a negative response from some longterm quarters. However, that doesn’t imply that there isn’t any other way to address this other than by non-disparagement or by the museum remaining silent under duress of losing sponsorship.

      A more mature approach, and arguably a better strategy as Shell seeks to pivot to and grown its reputation in renewables, would be to publicise the governance procedures that enable the museum’s independence in its mission. That would include presenting any science around petrochemicals or energy sector without undue influence.

      Otherwise, if it truly is a relationship only of short-term reciprocal convenience, then there really is little prospect of the museum avoid negative PR. In that case, it may be a strategic error by the museum, or could reflect desparate need.

    2. For example, Shell could have had a contract term allowing them access to the exhibition on a regular basis while it’s being prepared.

      Nothing too unreasonable about that, and from a PR point of view it now becomes about “how much value is Shell getting from putting money into the museum”, but it gives Shell’s reps a chance to come in and say “hey, this is not looking good for us, can you change it?” and deal with it quietly instead of going via contract law. The implied hint in the “this is not looking good for us” is “and if you don’t change it, we won’t sponsor the museum again”, but as it’s all done off the record, it’s hard to get people upset about it.

      That way, the only time it becomes a PR issue is if Shell makes egregious demands of the museum and the museum feels inclined to screw the relationship with sponsors by publishing.

  5. I am moved to wonder how the clause might operate if the museum were so careful that their care was clearly apparent?
    It’s an academic consideration, given the reputational damage already caused, but I am still curious.

  6. I agree, less is more.

    Sometimes a little hypocrisy helps everyone. The Sci Mus gets its money, Shell gets a bit of virtue and Greta gets a small stick with which to beat Shell and the Sci Mus. But I doubt that stick is a very big one and one she would have to use sparingly. Probably not worth all that lawyering over non-slagging-off clauses. Indeed the lawyering seems to be what is causing the trouble. Not so well thought out down at corporate legal….

    The big question is how big a stick does Greta get – and could it grow into a bigger one? Could the Sci Mus get strongarmed into embarrassing statements and posters. Well not if it wants corporate funding to continue. The Sci Mus may have to grow a pair or hire some decently devious publicists. Shell is going to get some stick whatever it does. Shell is useful in many ways, we can’t shut it down, we would suffer too much. So feed Greta et al some wins now and again, her noise is a useful steer.

    Seems to me this game could help everyone, just add a a pinch of sophistication and a little hypocrisy.

  7. I can’t help but think that the gagging clause was maybe the point of the contract, Shell coming up with the idea of sponsoring the Science Museum so they could then influence what the museum published.

  8. An aeon ago in a former life I was responsible for corporate communications for a number of “blue chip’ clients. This inclusion of a “gagging” clause was a reputational disaster just waiting to happen. The Heads of Corporate Communications for both the Museum and Shell should resign. What on earth were they thinking? And what were the Non Executive Directors (NEDs) of both organisations doing for their generous remuneration? They are supposed to ask awkward questions and offer sage advice. They did neither in this case. And if they claim they didn’t see the contract then they should have. That is their job.

  9. The agreement was clearly unwise and as DAG remarked both parties richly deserve the flak they are currently getting.
    One wonders, however, to what extent this is a consequence of the current governments policy of putting Tory sympathisers on the Boards of major cultural institutions rather than those with expertise that relates to the institutions function.

  10. A wiser Shell would accept – indeed possibly welcome – criticism of its historic activities, and make a big thing of how it is reinventing itself as a climate change activist company.

    The facts may or may not back this up, but they could throw their PR budget at it, on the back of being a sponsor of the science museum. Get on the front foot, as it were.

    As it is they are now going to get lots of criticism and will be unable to defend themselves as easily. Foolish.

  11. PR is apt to go wrong in all sorts of unexpected ways, but perhaps ways that could have been anticipated, given the business of the sponsor. Sponsorship is a grubby business, but museums and galleries want funding, and many businesses see some sort of commercial benefit in paying to be associated with them.

    Has the sponsorship agreement been published? I wonder if this was a standard clause offered up in a precedent produced by the Science Museum or its lawyers, or a demand made by Shell or its lawyers.

    The Science Museum has a surprisingly large number of corporate sponsors, from BP, Bloomberg and Cisco, through Pfizer and Raytheon, to Shell, Urenco and Vitabiotics. https://www.sciencemuseum.org.uk/about-us/support-us/corporate-partnerships Do they all have the benefit of a contractual undertaking of this nature?

    Is this an overcautious clause trying to stop something that would never have happened anyway? Are there any examples among the thousands of businesses that don’t have this sort of protection and have been disparaged by the Science Museum? I doubt the museum goes out of its way to bad-mouth anyone, let alone the hands that feed it.

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