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The deal included Ineos branding on the back of playing shorts and on the front of training jerseys for the nation's teams, including three-time World Cup winners the All Blacks and six-time women's world champions the Black Ferns.
In a statement on Tuesday, NZR said Ineos had "failed to pay the first instalment of the 2025 sponsorship fee, confirming its decision to exit our six-year agreement".
It added: "Having learned of Ineos' decision to walk away three years early, we have moved to protect the interests of New Zealand Rugby and the wider game.
"We have been left with no option but to launch legal proceedings to protect our commercial position.
"NZR is actively pursuing new commercial opportunities and global interest in the All Blacks and other teams in black remains high."
Last month, Ineos parted ways with four-time Olympic champion Ben Ainslie, having backed the Britannia America's Cup sailing team since 2018.
Ineos said in a statement it could "not find agreement" with Ainslie on "terms to move forward" after last year's event in Barcelona, which was won by New Zealand.
Ineos plans to compete in the next America's Cup under the Britannia name.
Ainslie's team said in response they were "astounded" by Ineos' future plans for the America's Cup and that the decision "raises significant legal and practical obstacles for them".
The company has a large sports portfolio, including owning Swiss football team FC Lausanne-Sport and French side Nice. It is also a co-owner of F1 team Mercedes and runs the Ineos Grenadiers cycling team.
Last month the Grenadiers said they were searching for new partners to join Ineos in order to keep pace with competitors after suffering their worst season in 2024.
"Ineos don't want to spend more money," confirmed John Allert, the Ineos Grenadiers CEO.
In 2021, Ineos' director of sport Sir Dave Brailsford hailed the partnership with NZR.
"The integration of the Ineos brand on this iconic kit symbolises our partnership to share best practice and collaborate on performance innovation," he said.
"I am looking forward to integrating the players and team at New Zealand Rugby into Ineos to support their ambitious performance goals and apply the knowledge and expertise found across all of our teams."
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