By Eryk Bagshaw
Singapore: Two key paragraphs in the Olympic contract give the International Olympic Committee extraordinary power over a sovereign government.
They can be found on page 72 and 73 under the subheading “termination”. Between them, they are worth billions of dollars, the most expensive insurance bill in history and potentially, the price of a country’s health for an Olympic Games.
There are less than three months until the Tokyo Olympics. Credit: AP
They state that the IOC shall be able to terminate the contract if the host country is at any time in a state of war, civil disorder or belligerence. Further, they add that if the IOC decides to terminate the contract - the host city waives any right to damages. Nowhere within the 81-page contract does the host city or national government have the right to cancel the biggest event in the world.
“The city of Tokyo does not have any power to decide whether or not the Olympic Games will be held,” said Yoshihisa Hayakawa, a professor of law at Rikkyo University, who also practises with law firm Uryu & Itoga in international commercial arbitration.
“This is the exclusive power of the IOC. The city of Tokyo is an entity that provides venues.”
The same contract has been in place for decades. It will be again in Paris in 2024 and Los Angeles in 2028.
”Accepting the legal contract is one of the conditions of entry to bid for the Olympics,” said Hayakawa. “Everything is disclosed and the host cities accept it”.
But no Games before Tokyo 2021 have had to grapple with a raging pandemic that has killed 3.4 million people around the world and is racking up 6000 cases a day in the host country.
The political pressure on the government of Japanese Prime Minister Yoshihide Suga to cancel the Olympics is reaching a crescendo. Nine prefectures including Tokyo and Osaka are now in a state of emergency after infection surges throughout April and May.
Last week, Japan’s politically shy corporate titans began speaking up. Toyota, an Olympic sponsor, said it was concerned about rising public animosity towards the Games. SoftBank said it was “afraid of having the Olympics”. Rakuten, Japan’s Amazon, said it was a “suicide mission”.
Then on Tuesday, the Tokyo peak body representing 6000 primary care doctors called for the Games to be called off, warning hospitals were already at capacity.
Suga says his hands are tied. “The IOC has the authority to decide,” he said in April. “And the IOC has already decided to hold the Tokyo Olympics.”
Athletes, for their part, have been asked to sign off on an Olympics playbook that declares they are participating at their own risk.
The options for Tokyo and the Japanese government are stark. Unilaterally cancelling the contract by withholding the IOC’s access to venues, for example, would put it in breach of the contract and leave it liable for damages. It is already estimated to have spent more than $28.7 billion according to Japan’s National Audit Board, a 200 per cent blowout on the initial $9.7 billion budget (Sydney 2000 cost $9.3 billion in today’s dollars after adjusting for inflation). Many of Tokyo’s costs have already been sunk into facilities and services, but a cancellation could leave them saddled with the bill for broadcast fees and sponsors revenue.
The IOC has taken out insurance against the Olympics being cancelled since 1980 but if Tokyo were to cancel the contract, the insurance companies could make claims against the local government to recoup billions in damages.
The local organising committee and Tokyo government have taken out their own insurance policies but the terms are confidential. It is also unclear if they account for a pandemic-driven cancellation, particularly after the Games were postponed and they went from an insurable unknown in 2020 to a known public health crisis in 2021.
“The provisions of the contracts with the insurance companies are vital,” said Alexandre Miguel Mestre, a European competition and sports lawyer from Abreu Advogados in Portugal.
“The interpretation of the event’s cancellation due to a force majeure situation and subsequent duty of payment of related damages is decisive.”
The sums at stake - more than $3 billion in broadcasting rights alone - mean that insurance claims are likely to be bitterly contested both by the insurers of the IOC and the local government, but also separately by the insurers of the individual sponsors, TV networks and other related commercial partners.
Legal experts say the most likely path to cancellation is a mediation between the IOC, Tokyo and the Japanese government. This would allow the IOC to claim the insurance on the basis that it can cancel the Olympics if it feels the safety of the athletes “would be seriously threatened or jeopardised for any reason whatsoever”.
Japanese Prime Minister Yoshihide Suga.Credit: AP
“That will then resolve through insurance and not litigation,” said Jack Anderson, a professor of sports law at the University of Melbourne. It would also avoid the public relations disaster of the IOC suing a host city.
But internally, despite more than 80 per cent of the Japanese public being opposed to the Games, and rising corporate and medical concern, the IOC, the Tokyo and the Japanese governments appear determined to press on.
Suga went further on Thursday, tying the Olympics to Japan’s international prestige and the global economic recovery from COVID-19.
“Japan is determined to lead a strong recovery of Asia, which is a growth centre of the world by overcoming the many difficulties that stand in our way,” Suga reassured world leaders at Nikkei’s Future of Asia forum.
Anderson said that opens up an ominous pathway. “The nightmare scenario for everyone is that it begins and a bit like the Indian Premier League, there is a spike in infections and it just has to be abandoned,” he said.
“That puts a huge pressure on the International Olympic Committee because it would make public health and the law a lot more complex.”