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COVID-19: Will hope or litigation light our way into Tokyo 2021?

Posted on 30 March 2020

The modern Olympic Games can be traced back to 1896, and has only previously been suspended three times. The well-being of everyone involved must always take precedence and the 2020 Tokyo Olympics has been rescheduled for 23 July – 8 August 2021, with the 2020 Tokyo Paralympics taking place between 24 August – 5 September 2021. Holding the Games in the current climate would have been irresponsible, and potentially trigger other tricky legal issues for the IOC and local organisers. However, re-organising the Games for 2021 is not without its legal challenges. Much of the logistics of rearranging the Games is still yet to be decided, leaving both athletes and commercial stakeholders in the dark for now.

An IOU from the IOC?

The agreement between the IOC and the local Olympic organising committee is heavily weighted in the IOC's favour. After all, there are always a number of cities that bid to host the Games, putting the IOC in a strong position when it comes to dictating the terms on which the Olympics are to be held.

In particular, the agreement makes it clear that it is the organising committee's responsibility to "secure and maintain, well in advance of the opening ceremony adequate insurance coverage in respect of all risks associated with the planning, organising and staging of the Games". It goes on to refer to the possibility of obtaining cancellation insurance.

On the other hand, the Japanese organisers will try to rely on another part of the agreement which recognises that if any provision gives rise to "undue hardship…which could not have been foreseen" then it can go back to the IOC and request that the IOC makes changes to the agreement to reflect this. As the IOC is under no obligation to make such changes, whether it will remains to be seen.

It remains to be seen how this will be resolved. However, given what is at stake and the amounts that the respective insurers are potentially liable for if an amicable agreement is not reached, we may well see this ultimately determined by the Court of Arbitration for Sport.

Much of the additional costs that may arise could possibly be avoided through legal means. In particular, the local organising committee will be checking the agreements that they have put in place with local venues and other commercial partners to see whether the legal terms cater for a postponement, like this. If not, then they may either seek other venues where practical or the Japanese Government may decide to intervene through legislation, in order to avoid incurring additional amounts.

The IOC has announced that, despite the Olympics taking place in the Summer of 2021, the Games will still be called 'Tokyo 2020'. This confirmation will be one way that organisers and commercial stakeholders will be able to mitigate against some of the additional costs and potentially the need (already mooted) for further legislation to protect against ambush marketing.

Commercial break

In light of the postponement, many sponsors and local businesses will suffer major headaches and huge financial loses. Airbnb, Coca-Cola and Samsung are among the major brands connected to the Olympics who, like everyone else, are trying to navigate their way through a very difficult time. Many of these brands will have already incurred costs securing talent, producing campaigns and purchasing media space ready for the anticipated launch of the Games. These contracts, often for large amounts, were on the expectation that the Olympics would occur in 2020.  Moving them back a year may not always be possible or practical, given the talent involved, without incurring further additional costs. There may be opportunities for those brands to break away from their contracts early in order to mitigate the financial impact and avoid paying hefty partnership fees for an event that will now take place in an increasingly congested sporting calendar next year.

Meanwhile, local Japanese hotels, restaurants and bars that had already geared up for a wave of international visitors may struggle to survive to greet guests in 2021 given the inevitable number of cancellations from Olympic visitors this year.

Businesses will therefore be looking at the small print of their agreements to work out the extent to which they are able to pull the plug on these deals or, at least, postpone them in light of the pandemic.

A high bar for insurers?

There has been much comment about whether insurance will provide a financial lifeline to the IOC. It has been widely reported for example that Swiss Re has an event cancellation exposure to the Tokyo Olympics of £250m. But whether cover will respond though is by no means certain. It may depend on the interpretation of wording that is likely to refer to cancellation being "as the sole and direct result of a cause entirely beyond the policyholder's control". As the Japanese Government did not mandate the postponement, one can see issues arising here. The situation is further complicated by the fact it is a postponement and not a cancellation.  All other parties, from national associations to media partners and other commercial entities, involved will also be looking to their insurances at this time to see if cover may respond.

Athletes not running scared

From an athlete's perspective, it is worrying times. With many athletes calling the postponement a 'relief' due to the nature of this pandemic, others have called the postponement 'heart-breaking'. Multiple qualification events have had to be cancelled and now need re-arranging. In lieu of these events taking place, the IOC has pledged to work with the federations to “make any necessary and practical adaptations to their respective qualification systems for Tokyo 2020”.

However there remains uncertainty with regards to qualification. Whilst it has been confirmed that the athletes who have already qualified (currently 57% of places) will automatically gain a place next year, there is still considerable uncertainly for the qualification of the remaining 43% of places. Will there be enough time for other athletes to meet the required standards? How will those standards be decided? While many athletes will understand the decision, recent legal action by athletes in the UK has shown that British athletes are not afraid to use legal methods to protect their interests if the answers to those questions prove unsatisfactory to them.

After all, the Olympics only comes around once every four years and is often an athlete's main chance to secure important endorsement deals. The delay to the Games will undoubtedly put pressure on those without regular sponsorship income. Even those that do have sponsors will need to check the agreements that they have signed, as they may no longer qualify for important performance-related bonuses that are often linked to achieving certain milestones by given dates.

The finishing line

The Olympics brings together 10,000 athletes, from over 200 nations, competing in over 30 sports, in front of 8 million people at the venues and several billions watching at home – so any deviation from the agreed plan is going to result in a number of commercial and legal issues.

Given the global public health emergency, it is in everyone's interests to pull together and find practical solutions to the problems that may arise. However, there will be varying opinions as to how to manage and resolve such complex issues. It seems inevitable, given the amounts at stake, that some of these disputes may make their way to the Courts.

All interested parties are likely to spend time considering the consequences surrounding postponement to ensure that plans are put in place to mitigate against the need to resort to legal action should problems arise.  

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