The Legal Complications of the Tokyo 2020 Olympics Postponement

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The International Olympic Committee has officially postponed the Tokyo 2020 Olympics and Paralympics after coming to an agreement with Japanese Prime Minister Shinzo Abe that the Games “must be rescheduled to a date beyond 2020 but not later than summer 2021, to safeguard the health of the athletes, everybody involved in the Olympic Games and the international community.”

Abe and Tokyo governor Yuriko Koike made a proposal for a one-year delay to IOC president Thomas Bach during a conference call; Abe describes Bach as supporting the proposal. The decision comes after IOC member Dick Pound framed postponement of the Olympics as a virtual certainty in light of the coronavirus disease pandemic in an interview with USA Today on Monday. Either way, the IOC and local organizers were clearly poised to reschedule the Olympics, which are currently set for July 24 to Aug. 9 but will be pushed back to yet-to-be-clarified dates in 2021. The Paralympics, meanwhile, are scheduled for Aug. 25 to Sept. 6 and will also be pushed back.

Many in the sports and public health communities will welcome the punting of the Olympics and the Paralympics to next year. The Olympics involves about 11,000 athletes, plus millions of coaches, spectators and volunteers. They interact with each other and touch shared physical surfaces. Those are conditions that could trigger infections and undermine public health. Even if spectators weren’t allowed to attend the Olympics or the Paralympics, athletes, trainers, coaches and others would find social distancing measures difficult, if not impossible, to follow. Many Olympic and Paralympic sports involve athletes in close proximity.

Along those lines, it was not in the interests of the Olympics or the Paralympics to exacerbate a pandemic. Each day, the number of people who test positive for COVID-19 climbs, as does the number of deaths associated with the virus. When compared with the common flu, COVID-19 is considered three times more contagious, and about 10 times more deadly (mortality rates of about 1.0% versus about 0.1%). While initial studies suggest that around 80% of infected persons are either asymptomatic or endure relatively mild symptoms, the other 20% experience serious and sometimes life-threatening complications.

Trend lines also forecasted the postponements of the Olympics and Paralympics. Across the globe, games, matches and other athletic competitions scheduled for 2020 have been canceled or postponed indefinitely. In the United States, the major professional leagues and the NCAA have suspended games and practices until further notice.

The IOC's decision comes after weeks of mounting pressure from around the world. On Sunday, the Canadian Olympic Committee announced its decision to not send its athletes to the Olympics or the Paralympics unless those competitions were postponed at least a year. To that point, USA Gymnastics on Monday called for a postponement. Later in the evening, the U.S. Olympic Committee made the same type of request. Those petitions were made with consideration of the safety of athletes, whom were surveyed, and likely with consultation with key sponsors, too.

The legal and business complications of postponement

While many constituencies will welcome the Olympics and Paralympics being moved to 2021 as promoting important public health objectives, there will be unintended and unwanted consequences. 

Take the athletes. While they probably feel relieved to avoid the risk of contracting COVID-19 at an athletic event, some might nonetheless feel disappointed by not being able to compete. They have trained hard, for years, to obtain this incredible opportunity. Some of them might not get another chance. There will also be a symbolic loss for the global community. The Olympics and Paralympics reflect the best athletes competing on the world’s stage with their nations cheering them on. At a time when the planet faces a once-in-a-century pandemic that has already damaged the economy and altered everyday activities, the Olympics and Paralympics could help to preserve some sense of normalcy.

The impact of postponements will go beyond mere feelings and sentiments. Postponements could trigger legal fallout that may take years to resolve. Consider what the postponements will mean for contracts negotiated by sponsors, networks and other entities in business with the IOC, the IPC and the Tokyo Organizing Committee. Those deals, which in some cases are worth billions of dollars, couldn’t be performed as worded if the games are moved to dates that aren’t contractually contemplated.

To illustrate, nine years ago, NBC and the IOC agreed on a $4.4 billion deal that runs through the 2020 Olympics. A few years later, the deal was extended to 2032, with NBC agreeing to pay $7.8 billion. These dollar figures are based on NBC’s substantial research into viewership, promotion, advertising and related factors that influence the value of a broadcasting deal. NBC’s financial projections are predicated partly on revenue the network anticipates generating through Olympic broadcasts this summer. A new date for the Olympics will, at a minimum, require reworking the contract and its associated assumptions about the amount—and timing—of revenue.

Sponsors and local business could also financially suffer by the Olympics and Paralympics postponements. Coca-Cola, General Electronic, Panasonic are among the major brands connected to the Olympics. They have agreed to pay large sums of money on the expectation that the Olympics will occur this summer. They are expecting millions of people to see their products and services on signs, banners and in advertisements. Meanwhile, local hotels, restaurants and bars that project revenue from the Olympics will lose out. The same goes for airlines, which have already been hit hard by the pandemic. Employees of these various businesses also stand to absorb some of the loss. With lower earnings, companies could turn to layoffs, furloughs and leaving unfilled positions open.

It’s possible that the postponements of the Olympics and Paralympics will lead to relatively amicable renegotiations of contracts. Everyone involved will understand that a global pandemic wasn’t expected and that no one tied to the games is at fault. Also, a delay in play from 2020 to 2021 might be a challenge that the parties could work around, especially if venues and facilities are available in 2021. A postponement is clearly preferable to an outright cancellation. In addition, the IOC announced that the names “Olympic and Paralympic Games Tokyo 2020” will be preserved. This announcement likely is designed in part to assuage sponsors that their investments in the “Olympic and Paralympic Games Tokyo 2020” brands won’t be lost due to new date.

Yet if renegotiations fail, there could be substantial litigation or, depending on the dispute resolution terms within the contracts, arbitration and mediation. Sponsors and networks could refuse to pay and invoke contractual terms to claim that their obligations have been extinguished. Most sponsorship and event contracts contain force majeure clauses. These clauses excuse the parties from meeting contractual obligations on account of a peculiar, unforeseeable and uncontrollable circumstance that rests beyond the parties’ control. Such an extraordinary circumstance is sometimes called an “act of God.” A disease pandemic is an example of an act of God that is sometimes listed in force majeure clauses. Other examples include volcanic eruptions, tornadoes, chemical warfare and terrorist attacks.

Sponsors and networks might also enjoy protection through impossibility, commercial impracticability or frustration of purpose clauses. These similar types of clauses essentially say that a party is excused from performing a contract if an unanticipated circumstance arises that substantially alters the parties’ understandings. Sponsors and networks could emphasize that the IOC is in the process of formalizing plans to postponing the Olympics. In addition, Japanese government officials have discouraged public gatherings and both Abe and Koike now recommend a postponement. These proclamations suggest that the kind of 2020 Olympics and Paralympics that sponsors and networks bid for years ago are no longer possible. Therefore, it could be argued, Olympic and Paralympic sponsorship contracts have become impossible or impracticable.

One group that might absorb the greatest loss from postponement of the games are the insurance companies that sold policies to the IOC, IPC, local organizers and other affected businesses. Those companies might end up having to foot much of the bill. It’s been reported that the IOC spent $14 million in insurance to offset the risk of the 2016 Summer Olympics in Rio de Janeiro being canceled. Whether a policy will cover a postponement, rather than a cancellation, of the 2020 Tokyo Summer Olympics, and whether a pandemic-caused postponement is contemplated by insurance policies are unknowns.

Lastly, the IOC, IPC and local organizers must determine sensible safety policies for the approximately 15,000 Olympic and Paralympic athletes who will compete next year. The same is true for millions of would-be spectators and volunteers, assuming they are allowed to attend. There’s a good chance COVID-19 will remain a danger in gatherings for many months. Likewise, medical experts expect it will take at least a year to develop a vaccine, get it approved and then manufacture and distribute it. How will Olympians and Paralympians be tested for COVID-19? And will athletes and spectators be told they are legally assuming the risk of contracting COVID-19 by participating or attending? Attorneys for the hosts and related businesses better make sure these issues are resolved and that their resolutions fully comply with Japanese law.

Michael McCann is SI’s Legal Analyst. He is also an attorney and the Director of the Sports and Entertainment Law Institute at the University of New Hampshire Franklin Pierce School of Law.