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What are the legal consequences of cancelling the Olympics?
Cancelling the Tokyo 2020 Olympic Games will lead to a host of legal and financial consequences according to one law academic – but is seemingly the only option as Japan remains in a state of emergency.
Lauren Croft
As the country declares a third COVID-19 state of emergency, with several prefectures – including those hosting the Olympic Games – being severely affected, the International Olympic Committee (IOC) and Japan remain in a stand-off over the games going ahead.
Monash University law academic Dr Eric Windholz said the legal implications of cancelling the games would be massive, with endless compensation claims and financial implications.
“Cancelling the Olympics would lead to a host of compensation claims. Everyone who made a financial investment in the games in the expectation of earning a return on that investment from the games proceeding, would feel the loss of a cancellation,” he said.
Dr Windholz added that in addition to the IOC and the games organisers, broadcasters, sponsors and attendees would be impacted if the event was cancelled.
“And they in turn would be looking to their insurers. And their insurers, in turn, would be looking for someone to blame. It has all the hallmarks of a lawyer’s picnic,” he said.
Dr Windholz explained that while the contract for the Olympics is between the City of Tokyo and the IOC, the Japanese government could take action to stop the event.
“The Host City Contract for the Tokyo Olympics is between the IOC and the City of Tokyo, the Japanese Olympic Committee and the Tokyo Organising Committee of the Olympic and Paralympic Games (OCOG),” he said.
“While the Japanese government is not a direct party to the contract, it has provided covenants and guarantees in support of Tokyo hosting the Olympics.”
The Japanese government can cancel the Olympics, but the contract between Tokyo and the IOC means that if the Japanese government does decide to cancel the games they’ll not only carry the costs of the preparations already underway, but will be required to compensate the IOC for any third-party actions.
“If the Japanese government takes actions that prevent the Olympics going ahead, the financial consequences will be huge,” Dr Windholz added.
“This does not include the cost of opportunities lost such as flow-on tourism, and of the impact of the loss of reputation that Japan would suffer.”
A research institute in Japan has estimated that cancelling the games would cost Japan ¥1.81 trillion ($21.3 billion) – but this would likely still be less than the cost of a nationwide state of emergency following the Olympics.
World Players Association executive director Brendan Schwab said in a statement last week that the IOC is currently not doing enough to guarantee both the health of the general public and the athletes.
“The IOC and all others responsible for the games have a fundamental duty of care to protect public and athlete health from harm, which means that no expense can be spared. Reports that up to three athletes will be sharing small rooms in poorly ventilated facilities are simply unacceptable,” he said.
“Harm to athletes and public health must not be collateral damage in staging the world’s largest mega-sporting event.”
Over 10,000 Japanese citizens have died as a result of the pandemic and the Japanese government has been criticised for an extremely slow vaccine roll-out, with less than 5 per cent of the population having been vaccinated so far.
The budget for Tokyo 2020 is already up to $19.9 billion, more than $3 billion over the original budget – a record for any Summer Olympics. With speculation the final spend will be almost double the original budget of $16.3 billion, the insurance industry would be hit with the largest global event claim in history if the Olympic Games were cancelled – with Tokyo losing millions in infrastructure costs, even after an insurance claim.
“A dispute of this nature and size – and around which there is legal uncertainty – is most likely to be resolved in a boardroom not a courtroom; and through mediation and negotiation, not litigation,” Dr Windholz said.
Lauren Croft
Lauren is a journalist at Lawyers Weekly and graduated with a Bachelor of Journalism from Macleay College. Prior to joining Lawyers Weekly, she worked as a trade journalist for media and travel industry publications and Travel Weekly. Originally born in England, Lauren enjoys trying new bars and restaurants, attending music festivals and travelling. She is also a keen snowboarder and pre-pandemic, spent a season living in a French ski resort.
